It has been good to see the market stabilizing over the past several trading sessions. Worries about the regional banking system brought on by the second and third largest banking collapses in U.S. history are ebbing. Hopefully actions taken by the FDIC and Treasury Department have been enough to ensure they will go down as one-off events instead of the beginning of a period of much greater volatility within the banking system. I still have my doubts but will end this week on a more optimistic note.
Today, I will quickly highlight a new position I took within my own portfolio this week as concerns about the banking system have waned. I also will provide an update a quick update on my 'stock pick of the year' as there has been some notable news around the company recently.
I just started a small opening position in First Hawaiian Bank (FHB) this week. The bank is the oldest and largest financial intermediary in Hawaii with assets of nearly $25 billion at the close of 2022. First Hawaiian is also the largest credit card issuer and processor in the state. The shares of this bank are off approximately 30% since the debacles at Silicon Valley Bank (SIVB) and Signature Bank (SDNY) earlier this month.
The company did have a drop in book value in 2022 thanks to unrealized losses from its securities portfolio, which is pretty endemic across the industry at the moment. However, its deposit base is stickier than most given a less competitive banking landscape in Hawaii. Charge-off and delinquency rates are solid, and its Tier One capital ratio is in good shape.
The company's CEO picked up just over $500,000 of new shares a week after SVB went into receivership. This was the first insider purchase in the equity since 2020. The stock is reasonably valued on P/E and now has a 5% dividend yield as well. I plan to incrementally build a position in this name.
Exelixis
Mid-cap oncology name, and my stock pick of the year, Exelixis (EXEL) has seen some notable news in the headlines recently. Last week, the company approved a $550 million stock repurchase program that is planned to be fully executed by the end of 2023. The company can easily afford to do so given the over $2 billion net cash on its balance sheet. At current trading levels, this will take approximately 8% of the outstanding shares out of circulation.
In addition, activist Farallon Capital Management has started to push for change at the company to unlock further shareholder value. Farallon has accumulated a just over a 7% stake in Exelixis and now intends to submit three nominees to the company's board.
Farallon believes the stock is an attractive investment opportunity and that Exelixis should return more capital to shareholders as well as improve investor communications. I concur. The shares are up 15% year to date, but odds look good further appreciation lies ahead.
