Understanding Banks and Investment Strategies

In episode 2 of Don’t Buy The Bull, Cassandra Toroian dives into the world of banking, sharing her experiences as a former bank analyst and discussing the importance of understanding the banking industry as an investor. She also shares insights on profitability metrics, industry drivers, and the process of analyzing bank stocks.

Tune in to gain valuable knowledge about the banking industry and how it can impact your investment decisions.

TIMESTAMPS

[00:01:06] Bank Cancel Culture

[00:07:08] Fear of Missing Out.

In this episode, Cassandra Toroian stresses the importance of grasping the growth drivers, competitive factors, and profitability metrics specific to the banking industry. By comprehending these key aspects, investors can make well-informed decisions when evaluating bank stocks and assessing their potential returns.

Furthermore, Cassandra emphasizes the critical role analysts play in scrutinizing industry-specific metrics and profitability drivers to differentiate between good and bad investments. By thoroughly understanding these factors, analysts can provide valuable insights to investors and help them make sound financial decisions.

QUOTES

• “And so it's something that as an investor, There are a lot of reasons why ignoring the entire sector would not be a good idea, in my opinion.”
• “I started reading a bunch of these reports so that I could get an idea of really what profitability metrics I was going to need to focus on and what were the important drivers for banks as far as performance. So that as I started to go through this process, I could get a better understanding of what was going to separate the good from the bad.”
• “So we're gonna get more into this and we're gonna be talking actually to some bank management teams along the way, as well as other public company management teams.”

SOCIAL MEDIA LINKS

Cassandra Toroian

Instagram: https://www.instagram.com/CassandraToroian/

Facebook: https://www.facebook.com/CassandraToroian1/

LinkedIn: https://www.linkedin.com/in/cassandra-toroian/

WEBSITE

FirstHand Research and Consulting LLC: https://1sthandresearch.com/

Transcript

Welcome to Don't Buy the Bull, a podcast dedicated to unmasking the truth behind how so-called trusted Wall Street institutions and the American government really work. I'm your host, Cassandra Tourian. You can call me Cass. I'm a seasoned former equity analyst, investment manager and former Wall Street Journal All-Star Analyst. And I'm passionate about helping people think for themselves by teaching them about things like investing, which may not be their forte. My only goal is to help you figure out how to use your own discernment and instinct to make good investment decisions for yourself. I have no skin in the game. And to do what I'd like to help you do, we have to look at the world around us, since the stock market does not operate in the bubble. So let's dive in. All right, so hey, everybody. Last week, we talked about bank cancel culture and we talked about that creeping up more and more out there. So I thought this week we should actually talk about the banking industry in more general terms, because after all, there are thousands of publicly traded banks in the U.S. alone. It's a big part of the S&P 500. And so it's something that as an investor, There are a lot of reasons why ignoring the entire sector would not be a good idea, in my opinion. I actually started my career as an analyst, as the bank analyst for a mutual fund company. I was straight out of my MBA program at the University of Miami. And I had no idea when I took a job at this mutual fund that I was gonna be the bank analyst because I was told either I was gonna be the internet analyst or the bank analyst. Now, remember this was back in 1996, because yes, I am over the age of 50. And I had already done quite a bit on internet stocks. In fact, AOL stock, if you remember, AOL. That was the stock that actually paid for my MBA program because I had convinced my parents to buy that stock. And they listened to me. And we were blessed with the fact that it did so well that I was able to have my education paid for that way. But hey, That's a different story. So anyway, I started this job and it was my first job in the world of investing. And if they wanted to make me the bank analyst, then so be it. It was my foot in the door. My first day on the job, they announced to everybody in the company that I was the new bank analyst and I got to work. So what does an analyst do? Well, An analyst, let alone a bank analyst, has to really understand not only an individual company, but also the industry that that company is in. So for example, we're talking about banking right now. What are the growth levers for banks? What are the things that are driving competition in an industry? What are the levers of profitability for an industry? What are the typical ratios of profitability look like? The returns on assets, returns on equity, things of that nature. There are all of these specific metrics that will pertain to an industry. So what I did was I started doing a lot of reading. I started reading reports that sell-side analysts had written on bank stocks. So what's a sell-side analyst? Well, sell-side analyst, sell-side analyst, is one that works for an investment banking firm, like one of the major firms like JP Morgan or Goldman Sachs, et cetera. And they follow a group of stocks that they're assigned to, and they do the deep dive into those stocks, getting to know the companies very well, building an earnings model on that company, getting to know management, getting to know all of the different parts of the company, as well as their competition. So they have a pretty broad view of not only the company specifically, but also the industry. So I started reading a bunch of these reports so that I could get an idea of really what profitability metrics I was going to need to focus on and what were the important drivers for banks as far as performance. So that as I started to go through this process, I could get a better understanding of what was going to separate the good from the bad. Once I did that, then I had to take the next step, which was hit the road because at that time, there were hundreds of banks just in Pennsylvania. These little podunk towns had these single branch or two or three branch banks that were publicly traded. And so my job as the analyst was to go and check them out. Tire kick, if you will, look them in the eye and see if these folks running these banks were decent managers? How did they answer the questions? And that's how I got my start. So we're gonna get more into this and we're gonna be talking actually to some bank management teams along the way, as well as other public company management teams. But that's it for this week. If you have any questions for me, and you have an idea for something you'd like covered, a topic you want covered, drop me an email at info at firsthandresearch.com. And next week, we're going to talk about the bull that is FOMO, fear of missing out. Cause there's a lot out there that's going up and there's some wusses out there that think they need to jump into a stock just because they missed the first 50 points. They don't want to miss the next 50 points. And instead they end up being total losers. So we're going to talk about that next week and until next Tuesday, have a great week. See ya. Thanks so much for tuning into this episode. I really do appreciate it. Be sure to subscribe to the show, and that way you'll get updates about new episodes. Or if you really liked it, maybe you can share it to other folks you know. That I would really appreciate. So until next time, this is your reminder not to buy the bull. Ciao.