Excellent “value” opportunities exist among community bank stocks and U.S. thrifts, as they typically have low downside risk and strong appreciation potential.

The U.S. Thrift portfolio is comprised of previously converted thrifts as well as deposit accounts in mutual banks, which give Polaris valuable preferential rights to purchase stock if the mutual institution converts to stock ownership. The bank stocks in the portfolio, typically smaller thrifts and community banks, are broadly diversified geographically. Many of the portfolio holdings have footholds in multiple markets and neighboring states.


The President-elect’s proposed corporate tax reduction and regulatory relief for banks, and the Federal Reserve’s decision to raise rates, led to a banner fourth quarter 2016 for many U.S. banking stocks. However, rising interest rates have yet to have a material impact on banks’ net interest margins. No actual revisions to regulations, tax rates or laws have been enacted, and there is no timeline for such initiatives. Yet, many U.S. bank valuations are trading over 20 times earnings, a level unsubstantiated without any actual change. We will carefully assess this industry in the coming months to determine which banking stocks justify their higher valuations on a fundamental basis. For more information about the U.S. Thrift portfolio, please contact Polaris directly.

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