Co-Founder and Portfolio Manager Brian Massey of Mar Vista Investment Partners says his firm recently purchased U.S. Bancorp (USB) for its Strategic Growth portfolio. Mr. Massey says USB has differentiated itself from its peers in how the company generates revenue in the face of challenges.
“The key difference is, USB generates as much revenue from fee-based services — like merchant processing, issuing credit and debit cards — and investment management services as they do from lending. So for every dollar of deposit, USB generates higher profitability with much better capital efficiency than the typical bank. Even in the current market where the average bank is earning high-single-digit returns on equity, USB is generating midteens returns,” Massey says.
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Massey says another important part of U.S. Bancorp’s moat is the management team, where CEO Richard Davis continues to lead a conservative underwriting culture.
“Unlike nearly all its peers who experienced massive losses and shareholder dilution during the Great Recession, USB was profitable every quarter and was able to protect its fortress balance sheet. The company remains well-capitalized today, even across the more stressed scenarios, which — again — creates an important competitive advantage,” Massey says.
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