An update on positions (VOYA, IBTX)

With the current pullback, I thought it'd be good to review the recent positions discussed:

VOYA's financials continue to improve. while not a home-run quarter, a positive GAAP result and improving operating ROE points to the normalization of business. The fee-based retirement services that VOYA provides are actually more stable (and marginally sticky given regulations, etc.). Compared to AIG, which is essentially a highly levered fixed income fund with relatively stable funding (due to ~100% combined ratio), VOYA should trade at a higher book/earnings multiple. I'm long both because both are cheap - but VOYA is more so relative to the underlying business. I have kept the same positions in each as a month ago.

The counterpoint to this is that GAAP financials still look weak on a TTM basis - underlying economics should show up more in subsequent quarters for the above thesis to be valid.

IBTX's growth makes it more expensive. A friend recently emailed about IBTX's most recent acquisition (BOH Holdings) at 2.5 tangible book - not cheap given that other regional banks range from 1-2.5x tangible book and large caps often at ~1x (e.g. BAC). Management was fair in paying with IBTX's own stock at 2.5x tangible. I, like many investors, remain wary with acquisitive managements because they often overpay for subpar assets. Size alone is not usually not a durable competitive advantage, especially when you are a community bank competing with WFC. Any advantage would be local, given relationships in the area and regional differentiators.

More generally, the portfolio has grown in size considerable due to more opportunities, and I have unfortunately ended up on margin (net long >100%). As a result, days like today can become problematic as I have little dry powder to buy. Nonetheless, nearly all of my positions have near-term catalysts and/or are compelling at current prices. The mental stops I have in place per position are still wide enough that the portfolio can swing even while not being stopped out. Given a choice, however, I have ordered current positions in order of conviction to sell (VOYA/IBTX are near the top, so won't be sold unless a severe disruption occurs). I don't anticipate current weakness to last past the Fed meeting next week.