Guru Howard Marks (Trades, Portfolio) is the co-founder of Oaktree Capital, an investment firm that was formed in 1995 by a group of individuals who had been investing together since the mid-1980s in high yield bonds, convertible securities, distressed debt, real estate, control investments and listed equities. Marks is also the author of "The Most Important Thing," which is a great book that focuses on what is important when it comes to making investments. Marks has an estimated net worth of $1.89 billion according to Forbes.com.
In the fourth quarter of 2015, Marks purchased 2,598,988 shares in Banner Corp. (BANR, Financial).
Banner Bank was founded 126 years ago as a Washington state chartered commercial bank and a subsidiary of Banner Corporation, which is a $9.7 billion bank holding company. The company’s motto is “do the right thing” and in 2015, the company was recognized by the Puget Sound Business Journal as one of the top 75 corporate philanthropists in Washington state. In addition to the company's monetary contributions, 1,100 employees at the company donated nearly 40,000 hours of community service to help those in need showing that they’re a company that truly cares about their community.
Banner has a market cap of $1.31 billion, a P/E ratio of 15.40, an enterprise value of $1.36 billion, and a dividend yield of 1.89%.
Banner has a few good signs according to GuruFocus. The company's P/B ratio has tied its three-year low. The company's stock P/B ratio is 1, and the dividend yield is close to a three-year high. The company’s P/S ratio is close to a three-year low at 3.06.Â
The company also hastwo severe warning signs according to GuruFocus.Ă‚ The Piotroski F-Score is low at 3, which usually implies poor business operation. The per share revenue has been in decline for the previous five years and the company keeps issuing new debt.
Banner has issued $11.986 million of debt in the previous three years, which is sustainable but,definitely something that is noteworthy.
The company's book value has been plummeting over the previous 10 years at an average rate of 11.7% per year, which is generally a bad sign as well. The company is also currently trading above its intrinsic value and has been plummeting since Marks' purchase of this holding. Since the beginning of 2016, Banner has dropped by $7.72 in price, a decline of 17% in one month to start off the year.
Below is a Peter Lynch chart for Banner Corp.
In October 2015, Banner merged with Starbuck Bancshares Inc. and immediately following that, AmericanWest Bank merged with Banner Corp. After the transaction was completed, Starbuck shareholders received 13.23 million shares of Banner common stock and nonvoting common stock and $130 million in cash.
The primary reason for Banner's acquisition according to the company's 10Q was to continue to grow the company through expansion throughout the Northwest and California.
Marks is an intelligent long term value investor who knows that Banner has a tremendous amount of experience and expertise after having been in operations for more than 125 years. Marks knows that there’s risk involved in a big acquisition; however, he knows that if Banner can continue to successfully expand their business throughout the Northwest and California, the company's earnings and revenues could potentially skyrocket in the future.
Marks' quote on taking risks from his book "The Most Important Thing" is the best one that I have found on risk assessment.
“None of us can know the future with certainty, risk is inescapable. Thus, dealing with risk is an essential — I think the essential — element in investing.”
Cheers to your investment success.
