Creditcard issuer Capital One Financial (NYSE:COF) dropped 4.7% from $86.66 to $82.62, reducing the Fund’s return by 13 basis points. The stock fell in April after the company increased its guidance for credit losses. This issue hurt the stock again in June, when Capital One was the only bank required to resubmit its capital plan under the Federal Reserve’s Comprehensive Capital Analysis and Review. We’re disappointed by management’s inaccurate credit-loss forecast, but we’re holding onto our position. We believe investors have over reacted, as Capital One still expects its recent credit card vintages will be among its most profitable ever. Furthermore, the stock is trading at a bargain valuation of less than 10x expected 2018 earnings.
From Jerome Dodson (Trades, Portfolio)'s second quarter 2017 Parnassus Fund commentary.
