Fifth Third Bancorp (NASDAQ:FITB) is First with Two Banking Analysts
Fifth Third Bancorp (NASDAQ:FITB), based in Cincinnati, Ohio has $205 billion in assets and operates 1,096 full-service Banking Centers, and 2,369 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina.
Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third is among the largest money managers in the Midwest with $483 billion in assets under management.
In this issue of the Wall Street Transcript, two top banking analysts picked FITB as one of their banking winners for 2021 and 2022 stock appreciation.
Peter Winter is a Managing Director at Wedbush Securities. He covers regional and Texas banks. He has 19 years of sell-side experience with CIBC World Markets, BMO Capital Markets and most recently, Sterne Agee CRT.
He was ranked first in earning estimate accuracy in 2019, 2018 and 2017 and third in 2016 and 2015 by Starmine. He is a graduate of Syracuse University.
In his 2,007 word interview, exclusively in this week’s issue of the Wall Street Transcript, Peter Winter bangs the table for FITB investors:
“Fifth Third Bancorp (NASDAQ:FITB) is a well-run company. It’s another Ohio-based bank. They’ve got an expense initiative in place. They’ve done an incredible job to hedge the interest rate environment for a long period of time with rates being low. That’s helped support the net interest margin.
They’ve been very disciplined on waiting for higher rates to invest all its excess liquidity into either loan growth or security. So there’s a lot of dry powder sitting on the balance sheet — $30 billion in excess liquidity, earning 15 basis points. That would be a real earnings leverage when they put that money to work.
They’ve got capital ratios that are above their targeted levels, so they’ll be aggressive with buying back stock. They’re going to increase the dividend in the third quarter. It’s a great story with the way that they’ve positioned the balance sheet, capital, and they’ve got dry powder for earnings growth along with an expense initiative.”
Peter Winter has been a long term advocate of the stock, suggesting investors put their money to work there in this 2019 2,406 word interview, where he stated that:
“They have some earnings levers that other banks don’t have to generate above average EPS growth. There will be costs savings from the integration of its pending acquisition of MB Financial (NASDAQ:MBFI), expected to close in the first quarter. …they de-risked the loan portfolio and exited $5 billion in loans, setting the stage for stronger loan growth in 2019.
They provided 2019 average loan guidance of 3.5% versus 1.2% in 2018. They have levers on the expense side, excluding the acquisition, where they are projecting 1% or less expense growth in 2019.”
Christopher Marinac is Director of Research at Janney Montgomery Scott. Mr. Marinac oversees the firm’s Equity Research team, which covers more than 225 companies within the financials, health care, infrastructure, and real estate sectors. Mr. Marinac has more than 27 years of financial services and research analysis experience.
Prior to joining Janney in 2019, he was Co-Founder and Director of Research at FIG Partners LLC, a premier investment banking and research firm specializing in community banks. At FIG, he established and managed an award-winning Equity Research team that covered more than 150 banks, thrifts, and REITs.
Earlier in his career, he spent six years as Managing Director at SunTrust Robinson Humphrey and five years as a Research Analyst at Wachovia Corporation (formerly Interstate/Johnson Lane Inc.).
He has served as a financial expert and resource to global and national media outlets including American Banker, Bloomberg, CNBC, Financial Times, FOX Business, and The Wall Street Journal. Mr. Marinac graduated from Kent State University with a Bachelor of Science in Accounting and Finance.
He is actively involved with Atlanta Ronald McDonald House Charities, where he is serving his fourth three-year term as a board member.
In his 4,851 word interview in this issue of the Wall Street Transcript, Chris Marinac sees tons of investor upside in FITB:
“From the large-cap perspective, a company that I think is not fully appreciated is Fifth Third (NASDAQ:FITB). We have a “buy” rating and feel that Fifth Third has a lot of untapped earnings, primarily because they can put their excess cash to work in higher loans and higher-earning assets. The company is going to be very thoughtful about being a bigger lender in both the consumer and commercial channels. They will most likely do more consumers sooner.
There’s an opportunity for Fifth Third stock to continue to trade higher.
They are going to be pretty active in share buybacks. They told us that, but I think that’ll play out for them as well. So the stock has certainly done well in the big picture. There is more upside and a bigger valuation still ahead for the company. Also, just like I mentioned in that whole group, there is an opportunity for the Fifth Third to have a higher earnings estimate, which therefore helps the stock price to go higher from here.
TWST: When you mentioned untapped earnings, what do you mean exactly there?
Mr. Marinac: That there is excess cash. Cash and securities are a large part of the balance sheet right now. We think that can be higher or can be utilized in the higher earnings. That is the main point. The other point that rings true is that, in the case of Fifth Third, the share count was going to come down, so that the share repurchases are going to cause a lower share count, which therefore means higher EPS numbers.”
These strong affirmations of Fifth Third Bancorp (NASDAQ:FITB) are available exclusively in the Banks Report from the Wall Street Transcript.
Previous reports advocating Fifth Third Bancorp (NASDAQ:FITB) investments are available including this 3,768 word interview from Portfolio Manager Barry James: “Fifth Third…is a national bank, but its focus is more in the Midwest, to be honest. That seems to be one of the areas that is coming back in pretty good order.
It is strong financially and has the ability to take advantage of the rising interest rates to boost the bottom line. We don’t like to see too much heavy overhead in the business so that they can take pretty swift advantage of the improving economy that we see.”
Matthew Lilling, Portfolio Manager & Managing Director, ClearBridge Investments
Matthew Lilling, CFA, is a Portfolio Manager and Managing Director at ClearBridge Investments.
He co-manages the Mid Cap, Mid Cap Growth, and SMID Cap Growth portfolios.
He began at ClearBridge in 2010 and has 15 years of investment industry experience. Earlier, he was a Private Equity and M&A Advisory Associate at MTS Health Partners and an Investment Banking Analyst at Lehman Brothers.
He received an MBA from Columbia Business School and holds a B.A. degree in economics from Emory University.
In this 2,734 word interview, exclusively at the Wall Street Transcript, Mr. Lilling details some of his top picks and his underlying research for investors.
“One company we hold is Chewy (NYSE:CHWY).
Chewy is a company we’ve been invested in since the IPO. It sells pet foods, products and prescription drugs online to pet owners. It can deliver them in one to two days. It is a digitally advantaged company that has a business model that benefited from the pandemic, as customers shifted purchases online.
It has also benefited from the increasing number of pet owners. This caused revenue to accelerate significantly in the summer of 2020 and we saw Chewy’s stock price quadruple from pre-pandemic levels. Chewy gave back some of those gains in early 2021 as growth stocks moved out of favor.
But when looking closely at the fundamentals, there’s still a lot to like. First, the majority of their products are consumables, so the customers they gained during the pandemic will keep coming back. And secondly, the new customers typically utilize more of the products that they sell.
So Chewy has this large recurring customer base and they can grow it by offering new services, like prescription drugs and higher-margin private-label products.
It looks like Chewy is now returning to pre-pandemic growth levels, but just off of a higher base, along with better customer economics and profits, and that all makes a strong argument for a sustained higher multiple.
Do we know if those types of companies are going to be in favor over the next six months? No. But we do think that Chewy can be a much bigger and better and more valuable company over the next three to five years.
Matthew Lilling has another top pick for investors in 2021:
“I’ll mention a company that has benefited more in the last six months.
Regal Beloit (NYSE:RBC) is a company that has benefited from the cyclical recovery of the economy, but one that we still feel has a lot of opportunities, mainly from internal optimization efforts under a new management team.
Regal sells electric motors into commercial and residential HVAC companies as well as those that make pool heaters and industrial power transmission equipment. And under the mismanagement of the prior CEO, this was a decade-long value trap.
It had low multiples, but there was never any reason for that to change.
When we started researching it last summer, we saw a company with pretty high market share, rational competition, and the ability to pass along price increases to cover commodity inflation. Those are pretty sound fundamentals.
But it also had returns on invested capital from only 4% to 8% over the last decade. When new management arrived in 2019, they laid out long-term targets to improve margins, organic growth and returns using a plan called the 80/20 plan.
They wanted to do simple things like decentralize profit and loss, or P&L, through regional and plant managers, rationalize its manufacturing footprint, get rid of unprofitable products, ask unprofitable customers for better pricing, and improve cash collections.
The prior management team was focused on projects that didn’t have payback to them. And the new management team is doing things like having the research and development team talk with the sales team to make sure that capital is being allocated correctly.
These aren’t complicated things to fix. And there’s a company-specific opportunity to improve margins, returns and growth. And so, even though this is a company that’s done really well over the last six months, there’s still a lot of room to move returns higher as the company executes on its internal strategy.
…especially in Regal’s electric motor product sets, where improvements in energy efficiency can have large impacts on improving environmental outcomes.
So as Regal invests in new products, the impact of residential and commercial HVAC systems on the environment is reduced.
I would also add that it’s important to understand what their customers are looking for, and what they need, and what their goals are for their products that they’re releasing to the end markets in order to adequately match the R&D spending and allocation to what the customer actually needs.
And that way, they’re being more efficient with their spend.”
A used car company is also at the top of Matthew Lilling’s stock pick list:
“Going back to another digitally advantaged company, Carvana (NYSE:CVNA) is an example of a company that benefited massively from the pandemic.
The stock, similar to Chewy, worked well throughout the summer of 2020, and has been range-bound since. When looking forward here, though, they still have a huge market to disrupt.
Carvana sells used cars online. This is another company that we’ve been invested in since the IPO, and is a good example of a company with a huge addressable market.
It has less than 1% market share, even after they’ve grown greater than 100% for three of the last four years. Customers were getting more comfortable buying big ticket items online, like used cars, prior to the pandemic and the pandemic accelerated that even further.
To be clear, this isn’t a pull forward in demand that’s going to create tough comparisons. It’s more of an acceleration in penetration into a massive growth market.
People are not going to go back to doing things the old ways, once they’ve seen how much of a better process this is.
In addition to continuing to penetrate the used car market online, Carvana has adjacent opportunities that they’re not currently taking advantage of. There may be opportunities to sell maintenance contracts or insurance to car buyers in the checkout process, as well as a call option on how new cars are eventually distributed in the future.
Carvana also has sustainable competitive advantages from building out reconditioning centers and infrastructure to distribute these vehicles. These are actions that are not easily duplicated by others.
My co-portfolio manager, Brian Angerame, has been an investor in the used car space for over 15 years, and provided a lot of the analytical power behind this one.”
Get all the top picks from Matthew Lilling by reading the complete 2,734 word interview, exclusively at the Wall Street Transcript.
Matthew Lilling, CFA, Portfolio Manager & Managing Director
ClearBridge Investments
email: info@clearbridge.com
Raymond Saleeby, President, Saleeby & Associates
Raymond Saleeby is President of Saleeby & Associates, Inc. He has over 38 years of investment experience. He formed Saleeby & Associates in April 2001.
In this 3,228 word interview, exclusively in the Wall Street Transcript, Raymond Saleeby details his investing philosophy and has many top picks to recommend to investors:
“There is always a good time to be contrarian. It’s a question of how many stocks are available to you. But it’s obvious with stocks hitting new highs, it’s harder to find contrarian stocks. But like anything else, there’s many opportunities, not just in this market but overseas as well…
I’ve followed many, many over a period of 38 years that I’ve been managing money. And I used to be, in the 1980s and 1990s, heavily involved in the water business. I thought that was the best business in the world for 30 years.
And I still think it’s a very good business, anything tied to it, whether it be water utilities or water service companies that service different pumps and the like. It’s just a great business. And I made a lot of money, but it was discovered in the last 10 years with the price/earnings ratios and the multiples increasing dramatically. So I’ve shied away from it.
I think the next best business that I found in the last five years — it’s a phenomenal business — is the flavor and fragrance business. It’s termed different names in different areas. But it’s a great business.
The same companies have been around, for the most part, the last 100 years, and the barriers to entry are enormous. It’s a sticky relationship. And it’s a nice business which you want to buy today in an environment where we’re going to have higher inflation.
And as you see higher inflation, your profit margins start to squeeze somewhat with higher material costs, higher labor costs. But you want to buy businesses where you can increase your prices where the customer is not going to jump ship just because you increase your prices to go to another competitor. And that’s why I say it’s a very good business — being the sticky business…
…it absolutely also includes beverages, drinks, foods, better ways to take sugar out of things — it’s basically healthy. It’s a good business during bad times and good times and it’s a business that’s not necessarily mostly American.
For the most part, it’s more European. It’s a business that offers phenomenal future opportunities with developments of new foods.
They’re healthier for you and more natural. Natural ingredients is a buzzword today in any business.”
Raymond Saleeby has some specific names in this sector:
“A business that has done very well that is heavily involved with millennials is the spice business. And you’re absolutely right.
They love spices.
McCormick (NYSE:MKC) has done very well over the years. It’s a company I bought many years ago.
And I’m not recommending it necessarily today, but they have red hot sauces, and those things are booming right now.
The millennials like that. And you’re absolutely right. Many people are looking for different things for food to add flavor that are not necessarily the traditional ones of salt, fat and sugar.”
Another sector that is catching Raymond Saleeby’s interest is real estate:
“Housing — I wrote a special report about it in the last newsletter and did an in-depth analysis. Basically, there’s a shortage of housing right now, and you have several factors affecting that.
One is older people who typically supply a lot of homes to the market for the younger people and next generation — they are staying in their homes longer, remodeling them.
They were afraid of COVID, because it felt like it was a death sentence to go to a nursing home last year. So that’s changing the supply dynamics.
Secondly, you’re finding that costs of lumber are increasing with other raw materials, dramatically in the last year, up 300% to 400% off the lows.
And you can’t find enough labor because a lot of people quit the profession since 2008 when you had the last housing bubble.
But right now, you have more housing affordability from an interest rate perspective than you’ve ever had before. And you also have other institutions like private equity out there and publicly traded corporations that are competing against you to buy a $300,000 or $400,000 house, which makes sense to do that because you can get the rental income to offset it and some growth behind the value of the house itself.
It makes a nice return. So they’re competing.
It’s very difficult for the average person to buy a house today in a hot market, especially because these are cash buyers. You’re seeing many, many overbids right now.
Thirdly, what’s changed housing more than anything else in the last 10 years, I think, is people buying it without seeing the house. And you’ve got such great graphics with Zillow (NASDAQ:ZG) and Redfin (NASDAQ:RDFN) and the like, that people can see what a house looks like.
You can see it in 3D as well. You can find so much more information that before was only for the real estate broker. It’s the same thing happening in our business, the financial business.
The consumer and the client are beginning to be so much more informed than ever been before. It’s mind-boggling how much information they can receive today. And they can receive it accurately and fast.”
Raymond Saleeby has a specific recommendation for investors:
“I think people need to take the Warren Buffett approach. If I were to tell people one thing it is go back and read everything you can about Warren Buffett. He may be the greatest investor of all time.
He shares some of his secrets.
And I followed him for my whole career and I’ve learned an incredible amount from him. His investment advice has been spot on, and he’s a genius. And we’re very fortunate to have him in our lives right now.”
To get all of Raymond Saleeby’s top picks, read the entire 3,228 word interview, exclusively in the Wall Street Transcript.
Raymond Saleeby, President, Saleeby & Associates, Inc.
(314) 997-7486
email: rsaleeby@cutterco.com
Eric J. Marshall, President and Co-Chief Investment Officer, Hodges Capital
Eric J. Marshall, CFA, currently serves as President, Co-Chief Investment Officer, and Director of Research for Hodges Capital Management.
He joined the firm in 1997 and also serves on the board of directors of the firm’s parent company, Hodges Capital Holdings. Mr. Marshall holds a B.A. in Finance from West Texas A&M University.
In this 2,738 word interview, exclusively in the Wall Street Transcript, Eric Marshall explains the investing philosophy of Hodges Capital for investors.
“…We’re very much bottom up; we focus entirely on what’s going on with the fundamental earnings picture of the companies that we follow. And we do pay attention to macro factors, such as what’s going on with interest rates in the Fed because they affect how risk is priced out in the market.
But we don’t spend a lot of time trying to forecast the macro environment.
What we’re really trying to forecast is what does the fundamental backdrop look like for each of the individual companies in our portfolio over the next 12 to 18 months, and then make the best risk/reward decisions in the portfolio based on that.
…When we look at multiples right now, relative to where interest rates are, we think that given the current backdrop for inflation rearing its head, there’s not much room for multiples to expand.
Also, higher corporate tax rates and higher capital gains taxes potentially could also be headwinds for multiple expansion.
So really, what this means as investors, is we want to be focused on businesses that have pricing power and have the ability to leverage their cost structure in an inflationary environment.”
This leads Eric Marshall of Hodges Capital to some interesting stock picks:
“One area that we particularly like in the material space is companies that make things like cement.
One of the stocks that we own in three of our four funds is a company called Eagle Materials (NYSE:EXP), and they are one of the largest producers of cement in North America.
They also are a leading provider of gypsum wallboard. But the interesting thing about cement is we haven’t really added any meaningful cement capacity in the United States over the last 20 years.”
Eric Marshall also likes a well known retail name:
“One that’s definitely kind of a turnaround but you don’t hear a whole lot of people talking about is Nordstrom (NYSE:JWN).
And that’s one that’s very unloved, and kind of hated. But we see that there are some valuable assets there. In a post-pandemic world, we still think over the next 12 months consumers are going to get back out and update their wardrobe. Nordstrom is kind of a higher-end luxury retailer, where you have aspirational customers realizing value.
And that’s one that looks very inexpensive to us.
It’s been flying underneath the radar and it is in a turnaround situation, but one that we think has a pretty good risk/reward. We believe that they have the balance sheet to make it through.”
The current market has created some investing dilemmas for Eric Marshall of Hodges Capital:
“…There’s certainly been far more upside surprises over the last several quarters — almost to an extreme.
At one point, we looked at our coverage universe and about 85% of the companies that our team of analysts follow saw earnings come in better than expected in the most recent first quarter. And I think in a lot of cases, management teams have given very conservative guidance because they lack visibility and because of the timing of the economy reopening.
Also, they lack clarity to what’s going to happen with federal policies that are currently underway from tax reform to other regulatory items.
There’s just a lot of uncertainty out there. And that set conservative expectations. So I think that’s why you saw so many companies beat analysts’ expectations over the last couple quarters.
In many cases, the stocks didn’t even go up when the companies beat expectations because it was such a widespread phenomenon that occurred.
Where if you didn’t beat expectations that was almost like missing expectations, and if you just met expectations, something must be wrong. And that’s something that will probably continue for the next couple quarters.
I’ve talked to a lot of management teams.
Our investment team this past year made over 3,200 contacts across over 1,000 different publicly traded companies. We’re constantly talking to management and we do get the sense that the guidance that’s made public on these quarterly conference calls is very conservative.
In many cases, it’s much easier to paint a picture for a company to exceed expectations than to miss expectations.
And that’s kind of become the new phenomenon on Wall Street.”
Eric Marshall has identified a fintech hidden inside a very old Wall Street name:
“We’re looking for companies that can actually prevail under difficult conditions like that and then actually emerge, maybe in a little bit better competitive situation than they had before the pandemic.
We also like NCR (NYSE:NCR), a company that makes point-of-sale equipment like cash registers, and they also make ATMs. But we also see a real recovery in things like self-checkout at retail, and we think that’s something that’s here to stay. As companies have learned to change their payment methods, people are paying using their phones.
A lot of that is automated through NCR’s hospitality business. And this is one that we think is actually poised to do really well on the backside of the pandemic as things continue to reopen.
So it’s kind of a derivative of the reopening. We think, really, it’s a fintech company hidden inside of an old company that used to make cash registers and ATM machines and things like that.
Now they’ve evolved from an appliance manufacturer to more of a software-as-a-service company. Because of the software component of their business and reoccurring revenue associated with that, we think they’re going to get a much higher multiple over the next year or two.”
To get all the top picks from Eric Marshall of Hodges Capital, read the entire 2,738 word interview, exclusively in the Wall Street Transcript.
Andrew Hokenson, Senior Equity Analyst, Pier Capital
Andrew Hokenson is a senior equity analyst at Pier Capital. His responsibilities include conducting equity research for the firm’s small- and smid-cap growth strategies. Earlier, he worked at Benefit Providers and Fordham Financial.
In this 3,626 word interview, found exclusively in the Wall Street Transcript, Andrew Hokenson of Pier Capital reveals his current top picks and his methodology for selecting them for his portfolio.
“…We are a bottom-up, fundamental-focused, long-only small-cap growth fund. We manage about $1 billion worth of institutional assets. We’ve been employing the same process since inception for about 35 years.
We have about 100 names in our fund, 75 to 100 names. We can be actively overweight in certain sectors.
We don’t do any closet indexing.
And our overweight can be a natural result of our bottom-up approach. Generally speaking, we have a three-legged stool as far as industries that we tend to have more focus on: tech, consumer and health care. And we don’t invest in REITs.”
Pier Capital equity analyst Andrew Hokenson believes in a deep research basis for his growth stock picks.
“So the investment strategy centers on a core principle, and that principle is that great products or services can create great companies. That’s where our deep research and experience come in.
We believe that great products and services are identified by a superior value proposition. And a value proposition fuels a customer, or retail customers, whether it’s a business or retail decision-making process.
It’s what compels the customer to choose one product over another.
So it’s either the product’s or service’s performance, price, or some combination of those two which create a superior value proposition.
And that value proposition is what we believe is the true essence of what creates disruption in a market. The strength of that value proposition, we believe, is what determines the lifecycle of that product, and therefore the earnings growth potential of that company.
So as the company has greater ability to penetrate that market and even expand that addressable market, that’s what creates that disruption and really what we call a secular growth story.
Now, if we identify this value proposition early enough in the growth phase, these companies have the opportunity to substantially outperform expectations.
We found that to be true time and time again.
So that’s essentially the core philosophy. We do try to back up a lot of what we believe through something we call key performance indicators.
Key performance indicators are a way for us to verify and justify what we find to believe to be a strong value proposition.”
One example of this investing research is the Pier Capital investment theme based on digital transformation.
“I’ll start off with just mentioning that overarching theme we call digital transformation.
Digital transformation is basically turning your business from being an analog, face-to-face process to being done through an app or online or digitally, and in any shape or form.
This is a major secular trend that encompasses a lot of different areas. I kind of drill down a little bit here.
Obviously, I’ll point out that COVID-19 was a huge catalyst for digital transformation. However, when you want to play these stories, there’s some obvious ones that really benefited from COVID.
We don’t really participate in those stories.
We don’t want to really participate in companies where the digital world was used as kind of a crutch during COVID. Instead, we invest in companies where we think COVID served as a proof point.
And I’ll get into more detail about what I mean about that. But things like food delivery.
We thought it was more of a crutch as opposed to a proof point. So we stayed clear of food delivery as a secular disrupter and we focused more on things like real-time analytics. We thought it actually served as a great proof point.
And so, when I drill down into where that goes, I believe that obviously we have a lot of cloud software companies out there these days and those companies had a phenomenal year in 2020.
And while I still think that there are a lot of growth opportunities within software-as-a-service, I do think that the valuations have gotten a little expensive.
This happened late last year, so we’ve been trimming exposure to software for the last year. Now, actually, we’re starting to dabble back into software again. But we are just dipping our toes right now.
I think there could be some more weakness ahead there, but we’re getting closer to where we feel the valuations are right.
So, staying away from software for now, I think another area that’s very interesting are these digital-first consulting companies.
There’s a few of them out there that are publicly traded. These companies help large enterprises with digital transformation.
And it’s a combination of business processes as well as kind of creative designs for app development and creating kind of a digital presence for large enterprises — Disney (NYSE:DIS) being a great example of a company that needs to build a better kind of digital presence. These companies will come in and help with that.
And interestingly, they’ve been doing so well with that. We just see not only new customers come along, but also continued investment from existing customers.
Also, no two industries are the same and certain industries are a lot slower to embrace technology than others for good reason. A lot of it has to with regulatory and compliance issues.
I remember when fintech started becoming very popular, when banks actually started to use technology. That for me was a very big sign that digital transformation is for real.
Because if banks are saying, I’m willing to go through all the hoops to start developing a more digital-based platform, that’s when I knew that this is for real.
And now, after COVID, the health care industry is doing that now.
The health care industry used real-time analytics during COVID and saw the benefit from it, and now they’re stepping in. And a lot of these consulting companies, or at least the ones that I look at, are going to be benefiting from that.
I think that’s a new market opportunity for them that should, I think, help drive future growth.
I do like these digital-first consulting companies. I think that they’re trading at a p/e of around 30 times. I think for some of them, maybe, they will be above a little bit. But a nice p/e multiple for a high-growth story, I think, is very fair.”
Get the complete picture by reading the entire 3,626 word interview with Andrew Hokenson of Pier Capital, found exclusively in the Wall Street Transcript.
Andrew Hokenson, Senior Equity Analyst
Pier Capital
www.piercap.com
Jonathan S. Raclin, Princicpal, Barrington Asset Management
Jonathan S. Raclin is a Principal of Barrington Asset Management.
Mr. Raclin graduated with a B.A. from St. Lawrence University and an M.A. from Northwestern University. Following service as a commissioned officer in the U.S. Marine Corps, Mr. Raclin was associated with White, Weld & Co., a Partner of William Blair & Company, and Executive Vice President for Capital Markets with The Chicago Corporation.
He is a former regional chairman of The National Association of Securities Dealers, a former President of the Bond Club of Chicago and of the Attic Club. He previously served as a director of the St. Simon’s Land Trust, and has been President of the Coastal Georgia Historical Society and Co-Chairman of Emmi Solutions, a privately held health care information company.
He is recently retired as a director of the Public Broadcasting Service in Washington, D.C.
In this 2,386 word interview, found exclusively in the Wall Street Transcript, Jonathan Raclin of Barrington Asset Management applies his long experience in the financial markets to this current point in our economic cycle.
“I employ an asset allocation approach using closed-end mutual funds. Presently, I own three mutual funds: Liberty All-Star Equity Fund (NYSE:USA), Liberty All-Star Growth Fund (NYSE:ASG) and Central Fund of Canada, now the Sprott Precious Metals Trust (NYSEARCA:CEF). The remainder of the portfolio is in cash.
…I find that valuation is an important component of determining what you want to own.
As opposed to relying upon somebody’s opinion as to what something may or may not be worth, I like the objective approach of being able to see what the fund is selling for relative to the net asset value. Sometimes, that ratio is at a premium, which is a cautionary sign.
Sometimes, it is at a discount, which often provides an opportunity.
I like closed-end funds where they have an objective distribution policy. In the case of the Liberty Funds, they pay a percentage of net asset value every quarter.
We are not dependent upon waiting until the end of the year or dependent upon some manager deciding what they are going to pay to the shareholders.”
The Barrington Asset Management principal has a sober view of the current economic cycle:
“I think people forget how strong the economy was before the virus showed up, by all criteria — unemployment, market valuations, GDP growth, almost everything that you could look at.
Everything looked very, very strong until the virus appeared. The result was dramatic with a significant drop in the stock market, that drop occurring in a very short period.
From a point of view of the government, I think that the current political administration, like the previous one, recognized that when we had the financial crisis back in 2008, a somewhat gradualist approach tended to suppress the rebound, and perhaps spread it out longer than otherwise would be the case.
This time, they basically decided to throw everything at it, including the kitchen sink, which is why we end up with these gigantic deficits.
The recovery has been exceptionally dramatic, both in terms of economic activity and, obviously, stock market results. Nothing breeds confidence in a somewhat dangerous approach as does short-term success.
The consequences of this have been huge increases in the national debt. And some of the proposals that Mr. Biden has put forward are going to significantly add to that debt.
I find it somewhat of a bizarre approach, that debt may not matter.
That might be true if you can finance with interest rates artificially controlled by the Federal Reserve. The Fed are buying Treasuries and mortgage bonds every month.
Paid for with money just created out of thin air.
On the fiscal side, the stimulus is flooding the market with cash. The administration has proposed an additional three or four programs, which means even more cash coming into the system.
It’s my view that the bond market has told you that this is going to continue for some time. It’s hard to see interest rates going up when the Federal Reserve is buying everything in sight.
Now, the consequences from the point of view of inflation are appearing, as one would expect, especially in very price-sensitive commodities.
We are going to see this problem get worse. It is going to be a real struggle for the Biden administration to continue.”
The Barrington Asset Management executive is not a fan of current Federal tax proposals:
“I will say I think that people do not appreciate the enormous consequences of the tax proposal of getting rid of what they call step-up in basis.
Basically, if you had bought a stock at $10 and then passed away, your heir might have a cost basis as of when you died — say, for example, $100. Under the new proposal, the cost basis would remain back at $10. That would result in an immediate tax due; you had a transference of ownership.
I have no idea how that is going to work without significant liquidation of investments — where else would people get the money to pay the tax?
So I think some of the tax proposals seem based more on revenge. I noticed recently an article that was talking about how very wealthy people like Warren Buffett and Elon Musk and Jeff Bezos apparently have not been paying any taxes on their “income.”
Well, it is not income, it is unrealized appreciation of assets.
If you are going to start taxing people based upon unrealized appreciation of assets that means you are going to have to start taxing them on their house, not just stocks.
What are you going to do about things like art and jewelry? What about a security with a loss? I am not sure that these proposals are very well thought out…
Diversify your assets and be an equity owner. I do not believe in debt, especially at these price levels. Number two, I believe in concentrating on distributions, preferably capital gains distributions, which are the majority of distributions from my funds. I believe that tax rates are going to go up, if only because we’re spending money at the speed of light.”
Get the complete picture of investing at this point in the economic cycle by reading the entire 2,386 word interview with Jonathan Raclin, found exclusively in the Wall Street Transcript.
Jonathan S. Raclin, Principal
Barrington Asset Management, Inc.
www.barringtonasset.com
Sandy Mehta, Founder and CEO of Value Investment Principals
Sandy Mehta, CFA, Founder and CEO of Value Investment Principals Ltd. (VIP), has over 30 years’ experience in the investment and asset management industries. With a 12-year track record, VIP is focused on identifying unique deep value investment opportunities on a global basis.
Its clientele has included some of the largest as well as most prestigious money managers in the U.S. and Europe.
In 2015, Mr. Mehta founded Evaluate Research, his third entrepreneurial venture in global financial services, focusing on providing institutional quality research coverage for rapidly growing companies in the U.S. and EMs such as China, India, etc. Mr. Mehta also founded Acumen Capital Management in 2004, and incubated a long/short pan-Asia Hedge Fund with $200 million in both HF and long-only assets.
Previously Sandy Mehta was a PM of two 5-Star-rated mutual funds, including a flagship US$15 billion Global Equity Fund at Putnam Investments & Wellington Management in Boston.
In this 2,862 word interview, exclusively in the Wall Street Transcript, Mr. Mehta reveals his award winning methods for picking deep value stock winners.
“Value Investment Principals, or VIP, is an independent investment research firm.
We seek unique, deep value ideas on a global basis.
We have a 12-year-old track record. Many of the ideas that we research and we communicate with clients are ideas that nobody else actively follows. So the ideas are unique.
All have value, many with high dividends and also they have catalysts and growth characteristics.
VIP is one of three finance and investment firms that we have set up. The other two being a hedge fund, as well as another research business. And we have offices in Singapore, India, as well as in the U.S.”
One deep value example is another investment firm.
“…For example, one of the stocks that we follow is Silvercrest Asset Management (NASDAQ:SAMG). They are headquartered in New York City. This is a money management firm. It’s an investment advisory firm. They’ve had an amazing track record in all of their strategies for the past 24 years.
The stock is extraordinarily undervalued. It’s up 40%, since we got into this stock just about a year ago. The stock is trading at seven times p/e. It’s got a 4.5% dividend yield and it’s got an 18% free cash flow yield. And this company, over its 24-year history, assets under management have compounded at 31% per annum. And these guys really specialize in small cap and value investing and those strategies have really come back over the last six months. That is a huge catalyst for them.
Silvercrest has grown organically. But they’ve also made tuck-in acquisitions. They also have what they call the OCIO — outsourced chief investment officer initiative. So there are many things that they’re doing that are unique.
There are many asset management firms that are struggling because of poor performance. But this one is still, we think, relatively undiscovered with very strong performance and actual strong growth as well.”
Investment firms in China have significant growth opportunities, according to Sandy Mehta leading to their inclusion as deep value stock picks:
“Another stock is called Hywin Holdings (NASDAQ:HYW). It just recently had an IPO in March three months ago on the Nasdaq. It’s based in China. At the IPO, it had the price of $10 per share.
Today, the stock is about $8. So the stock is down 20%. And they are the largest independent wealth advisory firm in China. They also have an office in New York City.
But as the Chinese population, the high-net-worth category is the fastest growing segment of the Chinese population. And everybody, whether you’re in China or the U.S., everybody’s looking for which mutual fund in which to invest, what products to invest in to maximize your investment income.
And these guys really distribute a lot of privately sourced products. So real estate products, private equity products. That’s why they’ve been able to really grow their client base.
They just reported earlier this week on Monday 98% net income growth on 47% revenue growth for the March quarter. And the industry is only 6% penetrated in China versus wealth management advisory’s 32% penetration in Hong Kong and 62% in U.S.
This is a secular growth area.
The stock as I speak to you today is trading at a 6 p/e, 28% net cash, 18% free cash flow yield. At some point, it’s our opinion that they will likely have a sizable dividend as well.
Being listed on the Nasdaq, this is an easy way for U.S. investors to get exposure to companies overseas.”
Another China based asset manager makes the deep value cut for Sandy Mehta:
“Sun Hung Kai (HKG:0086) is a niche lender and asset management company in Hong Kong and China. Despite the recession last year, they had 23% earnings growth in 2020.
The stock is now beginning to do well; it’s up 30% year to date. We still see another 80% upside.
The stock is extraordinarily cheap and that’s why we like to talk about it. It’s trading at 0.5 times price to book. It has a 3 p/e and it’s giving a 6% dividend yield.
It’s a theme in terms of our investment style. We like to be paid while we wait. And these guys are doing a lot of good things in terms of setting up the company for future growth.
They’ve had a positive transformation disposing of their brokerage business and they’re adding fund management.
We think that despite the strong growth last year, there’s a lot more growth going forward for the company as well. For a 3 p/e, a 6% dividend yield, it’s just extraordinarily cheap.”
Sandy Mehta also sees deep value in luxury goods manufacturer.
“Another one is Movado (NYSE:MOV), which is based in New Jersey. They have their origins in Switzerland. So obviously, it’s a well-known watch brand. And what’s happening now, despite the global recession last year, and COVID still a concern globally, there’s really a boom in global luxury partially because maybe the stock markets have done well globally.
So companies that are listed in Europe such as LVMH (OTCMKTS:LVMHF), they own Louis Vuitton, Kering (OTCMKTS:PPRUF) which owns Gucci, Richemont (OTCMKTS:CFRHF), Cartier — those stocks are all trading at 30, 35 times earnings. They’ve all had very strong March quarter results.
Movado is a stock that is trading at a 6 p/e for a $30 stock, they have $8 per share in net cash and if you look at Swiss Industry Association data, watch exports out of Switzerland are booming, particularly to places like Asia and China.
This stock has risen above 40% since when we got into it, but it’s still about 40% from its five-year highs. And I think it’s really a beneficiary of strong demand for luxury products.
While its peer stocks are trading at record highs, this stock still has a long way to go, we think. We see at least 80% upside from here.”
Get more deep value top picks from Sandy Mehta by reading the entire 2,862 word interview, exclusively in the Wall Street Transcript.
Sandy Mehta, CFA, CEO
Value Investment Principals Ltd.
www.vipglobalresearch.com
email: sandy@vipglobalresearch.com
Don Harmer, President & CEO, GRASS Qualified Opportunity Zone Fund
Don Harmer is President and Chief Executive Officer of the GRASS Qualified Opportunity Zone Fund. Mr. Harmer, in addition to overseeing GRASS, is the president and CEO of Corporate Services of Nevada.
He has served as a confidential consultant and counselor to more than 3,000 clients around the world since 1993, focusing on enterprise risk management and operational and HR assessment.
He has significant experience as a leader of small- to mid-sized high-growth startups, emergent small businesses, and nonprofits, including power-generation and global energy firms, at both the key executive and board of director levels.
Mr. Harmer provides ongoing guidance in the operation and success of Corporate Services of Nevada.
He currently resides in Nevada with his wife and three daughters.
In this 3,305 word interview exclusive to the Wall Street Transcript, Don Harmer explains Opportunity Zone investing and the easy method his organization has created for this specific tax break.
“The qualified opportunity zone fund is part of the Jobs and Tax Act of 2017.
There are some subsets in that: 1400Z-1 and 1400Z-2. It has created a public-private partnership, so to speak, to encourage investors to invest in these qualified zones that have been designated by the different states and the U.S. government, based on the census tract, as mostly underserved areas, whether rural areas in Nevada or the West, and in the East often it is rural areas. It has been fairly successful.
We hybridized our fund with Internal Revenue Code 1202, which is qualified small business stock, and that has been around for quite some time.
The benefits to the investors have been bouncing around to being anywhere from a 70% to a 100% discount on capital gains, so savings to taxes.
During the Trump administration, 100% tax regains were codified into the registers. If you were to invest in our fund as a qualified opportunity zone fund under 1400, you can take gains from a previous investment and reinvest those into the fund and defer your gains taxes until December of 2026, and then get a 10% discount or a 10% step up in basis.
If you hold your investment for another period of time, as in three, five, or seven years, whatever it is, then depending on the entry point, 100% of your gains are tax free from that point forward.
Under the 1202 — that is what I refer to as fresh money investment or non-gain money — it can be invested and if held for five years and a day, 100% of the capital gains are tax free, so up to 10 times your basis, plus a basis with a maximum of $10 million.
Under 1202, there is a maximum tax-free amount of $10 million, whereas under 1400Z, it is more or less unlimited.”
The opportunity zone focus provides a variety of investment options:
“The zone is defined as contained within certain census tract borders. That was a function of the code to be able to define the locations of opportunity zones.
Each individual state was allowed to elect and designate areas, and then the federal government approved them.
They thought that was the most prudent way to identify an opportunity zone, and that is to use the pre-existing census tracts because they had all the data behind those different areas already.
We have two main focuses, and those are building very high-tech specialized aircraft hangars to be able to service Department of Defense contracts on government aircraft.
We also have the ability or a goal to build general aviation hangars for private parties that are not related to the government or the military.
We are located in a very unique location in an opportunity zone in Lyon County, Nevada.
I don’t know if you’re familiar with the Tahoe Regional Industrial Center in Nevada.
It has been in international news for quite some time now, as Google (NASDAQ:GOOGL), Tesla (NASDAQ:TSLA), Switch (NYSE:SWCH), and Blockchains, and similar companies have built big huge centers near there, as in data centers and manufacturing centers, etc.
We’re hoping to capture that private aviation market with general aviation hangars at the Silver Springs Airport.
The other area that we are investing in currently is regtech, or regulatory technology.
Regtech companies provide solutions in regulatory reporting, risk management, identity management and control, compliance, and transaction monitoring. We are specifically developing a proprietary SaaS — software as a service — to enable DOD — Department of Defense — contractors, meaning government contractors, to comply with government regulations for tracking every part that’s used on a government contract from inception to installation.
It’s been extremely challenging for those government contractors to comply so far, because there really isn’t a good, sound system out there.
We refer to it as we’re entering the regtech space because we have plans to expand into other regulatory environments after we get some ITAR approvals on our software.”
The structure presented by Don Harmer creates more liquidity options than is typical for Opportunity Zone investors:
“Most of it is going to be balance sheet supported, because we really aren’t going to be actively publicly traded in the beginning.
Now we have that option to take that next step when we close our Reg A+, after raising $50 million.
There are several options that we could pursue. We could do a full-blown registration and become publicly traded, or we could sign on for one of our tokenized security through our broker/dealer and a stock transfer agent, and trade on the secondary market.
If we went the route of the secondary market, if one of our shareholders wanted to sell, they would put the sell order through our broker/dealer or through their broker/dealer because at that time our stock could be put into IRAs.
Those are just two of the options that we could exercise. That’s why we set it up the way we did, to hopefully inspire our investors to have a long-term hold mindset and hold it for at least five years.
That being said, even after we close our Reg A+, if we don’t do that tokenized security platform — meaning sell shares on the secondary market, shareholders would still be able to liquidate their shares through the broker/dealer by placing a sell order.”
Read the entire 3,305 word interview with Don Harmer and get the complete picture on this Opportunity Zone investing vehicle, exclusively in the Wall Street Transcript.
Don Harmer
President & CEO
GRASS Qualified Opportunity Zone Fund
Ron Homer, RBC Global Asset Management Impact Investing
Ron Homer leads RBC Global Asset Management’s impact investing effort. Before joining RBC, he was co-founder and CEO of Access Capital Strategies LLC, an investment adviser specializing in community investments that was acquired by RBC in 2008.
Previously, he had a banking career including 13 years as president and CEO of the Boston Bank of Commerce. He has been on boards for Sallie Mae, Nynex Telephone and the Boston Foundation.
He also is vice chair and a founding board member for the Initiative for a Competitive Inner City, a research organization founded and chaired by Harvard professor Michael Porter to promote private sector investment in America’s inner cities.
He received a B.A. degree from the University of Notre Dame and an MBA from the University of Rochester.
In this 2,797 word interview, exclusively with the Wall Street Transcript, Mr. Homer describes the efforts of RBC Global Asset Management’s efforts in developing investments in underserved markets.
“The fund was created in 1997 and was the first registered mutual fund to focus exclusively on community development activities. Its initial focus was designed to help banks meet their regulatory objectives under the Community Reinvestment Act by targeting the use of government loan programs in underserved communities and among underserved populations to support access to homeownership, affordable rental housing, small business development, health care and education.
The fund was designed to help banks make investments in underserved communities, and particularly to create investments close to the credit quality and liquidity of investments that banks would ordinarily hold on their balance sheets.
Our belief was and is that the best community development impact investment strategies are those that are sustainable and scalable…
We started with banks as our primary investors. But based upon our performance and investment strategy, we were able to expand to non-bank investors in 2004, with our first public fund investment.
Soon after that, we expanded to foundations. We started at 100% bank investors and we are down to less than 50% today. We’ve seen growth both from the public sector, from the endowment and foundation sector, and most recently from the corporate sector.
We have an excellent track record with clients not only making a first investment, but then adding to those investments.”
The RBC Global Asset Management executive describes his investment “sweet spot”:
“Michael Porter, a guru on competitive advantage, recognized specific competitive advantages in many low- and moderate-income communities for business formation, e.g., close proximity to anchor institutions such as hospitals and higher education institutions, proximity to public transportation, as well as rail and highway transportation nodes.
And a potential workforce underutilized and under-tapped. Part of the research of ICIC is to identify how those competitive advantages can support business growth within low-income communities in central cities.
One of the early successes of the research was the study on food shopping. The Stop & Shop that’s located in Grove Hall as well as the one in South Bay, both in Boston, were conceived and inspired by that research.
“…When you took the density of these areas, and the amount of income spent on food buying, that there was actually higher demand for groceries and similar products per square mile than in most suburban locations.
The combination of high density and lack of competition created an opportunity for grocers to enter that market, and take advantage of volume in areas where there wasn’t much competition.
I think that’s the sweet spot of impact investing, when you can find an inefficiency in the market, take advantage of it, and, as a result, provide a well-needed service as well as to actually make a financial return. You’re doing well by doing good.”
The inefficiencies of community investing are targeted by Ron Homer of RBC Global Asset Management:
“…There are a wide variety of government loan programs available to encourage neighborhood development that were being used with success in suburbs but underutilized particularly in lower-income minority communities where the need for increased investments are the greatest.
Many of those programs, in the wake of COVID-19, are expanding. However, often the tools that are available to make loans in underserved areas are mostly being used in areas in which investments were already flowing, so they were supplemental as opposed to essential.
One of the strategies that we provide is to introduce targeting and intentionality in the use of those programs. We create mortgage-backed securities, but the borrowers all make below the area median income, and a high percentage of those borrowers are African Americans, Latino or people of color.
Same thing with bonds issued by housing finance agencies that are specifically targeted to provide affordable housing or affordable homeownership opportunities.
We like the impact of those bonds when targeted to areas most underserved…
We found that the mortgage-backed securities created by loans to low- and moderate-income homebuyers, as well as the rental housing bonds that are provided by housing finance agencies and other government agencies, can provide excess returns compared to comparably rated securities.it’s an opportunity to build more stable communities, both with younger homeowners, many of whom are Black, Latino, and people of color, but also to build more diverse communities.
So it’s a combination of people, which we also think in the long term builds healthier communities.
So, yes, we know that many of the areas that have been most adversely affected by the pandemic have been areas where the homeownership is at the lowest rate and with a lot of overcrowding and substandard living conditions.
We believe that providing more opportunities for people to own homes and to take ownership of their communities is the first step in building stronger and healthier communities.”
Ron Homer of RBC Global Asset Management has an interesting origin story for his participation in community service investments:
“I first got interested in — I guess, at that time it wasn’t called impact investing — in community development as a career in the 1970s. I was born and raised in the Bedford Stuyvesant section of Brooklyn, which from 1940 to 1960 went from 75% white to 85% black.
And just as I was finishing college, Bobby Kennedy, who then was the senator from New York, was running for president. He formed something called Bedford Stuyvesant Restoration Corp.
And I just recently saw a quote from him which has been sort of my guiding principle, where it said that the combination of community action, government and private enterprise — that none of them by themselves could solve the problem, but their combination is the hope for the future.
So we believe that the best strategies combined, both philanthropic, government and private enterprise, and when they’re aligned to help attract the flow of capital into a community, is when you can see real economic development.
I actually spent a day with Sen. Kennedy and his wife, Ethel Kennedy, in a motorcade in April 1968. I was a senior in college. And it was the day that Martin Luther King was assassinated.
During the ride and before King was shot, Sen. Kennedy asked me if he became president, would I come work with him to try to make a difference. I replied with a definite yes.
Unfortunately, Bobby Kennedy was assassinated two months later.
A month later, I went to work as a social worker for the antipoverty program in South Bend, Indiana, which then made me realize that many social problems are intertwined with economic problems, which can best be addressed by expanding economic opportunities.”
Read the full 2,797 word interview with Ron Homer of RBC Global Asset Management, exclusively in the Wall Street Transcript.
Ron Homer
Chief Strategist, Impact Investing
RBC Global Asset Management
(617) 722-4700
www.rbcgam.com
email: ron.homer@rbc.com
Larry, Jasinski, CEO, ReWalk Robotics
German government approval for his products has boosted Larry Jasinski who has served as Chief Executive Officer and as a member of the ReWalk Robotics Ltd. board since February 2012.
From 2005 until 2012, Mr. Jasinski served as the President and Chief Executive Officer of Soteira, Inc., a company engaged in development and commercialization of products used to treat individuals with vertebral compression fractures, which was acquired by Globus Medical in 2012.
From 2001 to 2005, Mr. Jasinski was President and Chief Executive Officer of Cortek, Inc., a company that developed next-generation treatments for degenerative disc disease, which was acquired by Alphatec in 2005.
From 1985 until 2001, Mr. Jasinski served in multiple sales, research and development, and general management roles at Boston Scientific Corporation. Mr. Jasinski holds a B.S. in marketing from Providence College and an MBA from the University of Bridgeport.
In this 2,582 word interview, exclusively in the Wall Street Transcript, Larry Jasinski explains how German government approval will get critically injured patients back on their feet:
“Our main product, which we’re well-known for, is called the ReWalk 6.0. We will create additional generations of that as a product made for personal use in everyday life, whether it be at work, in the community, in your home, or people that do special events.
In the other three product lines we have, the largest one is a soft exosuit, a very small, lightweight system that is driven by cables. We did this in a collaboration agreement with Harvard University and brought it to market just before COVID hit.
It is a device for treating those who have had a stroke, and it helps them relearn the proper gait pathways. It works in terms of being able to walk in a traditional gait pattern, to walk faster, to walk further, and to be healthier.
Those soft exosuits will eventually be a formula for us to provide these wearable robotics for multiple sclerosis, and we hope, for Parkinson’s. We still have to build their data for more applications.
For stroke, we’ve already brought it to market for use in the clinic.
Our next version of the product is a product you’d use at home.
You could use it for a period of therapy, and perhaps longer term for patients who need it for a long cycle of use.”
The robotics products are developing widespread reimbursement and was recently awarded German government approval.
“There’s been extensive effort to develop a reimbursement pathway and positive results.
Our work to build the database — the supporting clinical data, economic data, and quality of life data has grown dramatically along with the user base.
When we first gained FDA clearance, we had a limited number of patients from safety-based studies.
The real-world data from selling and from additional research allowed us to achieve coverage in some major markets, such Germany.
The government issued coverage codes and have since established six full-coverage contracts. So if you’re a German citizen, injured at work through workers’ comp, or injured where you have one of the private payers that have signed contracts, you now can get one of these systems, take it home and live your daily life with it.
For the last year, COVID has slowed training and studies and as we regain access in the future, we’ll become more active.
In the United States, we will use the database that drove VA and German coverage and we have additional data that’s developing.
We applied in late 2019 for a coverage code to be created by the U.S. Centers for Medicare Services — CMS — and code K1007 was issued last summer after the public hearings and it took effect last October.
And we’re now moving towards establishing pricing, the product category and contracts in the United States.
Beyond that, we’re pursuing case by case, which tends to discriminate towards those with the ability to appeal or be most vocal rather than reaching those that can most benefit.
That’s a slow and harder process.
And that’s why these contracts, and the long-term success of them, are so important.”
The German government approval will support 2021 growth.
“Our second half of this year is looking at how much COVID allows us back into the market, which we expect, at the current rate of vaccination that our employees and our customers and our clinics are having, is going to be pretty good.
We’ve done a few things. In the early part of this year and late last year, we did a lot of work to solidify our balance sheet. We’ve done some additional capital raises. We’ve reduced our burn.
We’ve eliminated all of our long-term debt. So we believe we have enough of a runway now to take us to breakeven operations.
We have important milestones that will affect us, including a German Federal Court decision, which may even broaden coverage in Germany if it’s positive. That will occur probably sometime this year.
We need to show year-over-year growth basically, so the market can realize that this insurance is working.
Well, there’s an advantage and a disadvantage to being the first one in an industry, and ReWalk was the first and only company to bring a product to market originally for personal use.
It didn’t have any competitors at that point. We’ve had one other enter the U.S. market, but we are several generations ahead. However, we do see more and more activity.
In the stroke market, we see some fairly good efforts, and one particularly good design with one of our competitors, Ekso Bionics.
I think more competitors actually would help this industry develop. So we would encourage that.
But our expectation is that we’ve been able to lead. We were the first ones to bring the ReWalk, we’re the first ones to develop a soft exosuit, and we’re the really the first group to focus heavily on MS and Parkinson’s.
So I believe we’re going to get to lead it. I hope others join, because that will help push the industry forward in a positive way.
The thing we did most of last year was to build pipeline. We made contact with a lot of veterans who completely qualified for the product, and we got them ready. Despite COVID, we kept our team in place, so we could build a pipeline.
We’ve done that in Germany, we’ve done it in the U.S. with the VA and with workers’ comp patients in particular. So we’re reasonably set up, as COVID opens, to help many of these patients.”
Read the entire interview, including all the details on reimbursement approval by the German government, in this 2,582 word interview, exclusively in the Wall Street Transcript.
Larry Jasinski, CEO, ReWalk Robotics Ltd.
(508) 251-1154
www.rewalk.com
email: contact@rewalk.com
