After last night’s debate, it would appear that at least one of the three pillars of my speculation strategy could be at risk. To review, 65% of my portfolio is allocated into buckets of Anchor, Core, and Satellite categories. The remaining 35% is loosely split into what I refer to as Speculative Pillars. These are theme-based sections that I feel can be rewarding – at least in the short term:
- Cord cutting
- Transaction Processing
- Regional Banks
I will address my thoughts with #1 and #2 in a later post. But last night the Republicans put #3 squarely in their cross hairs. My thesis addressed here and here, is that regional banks are good investments not for their dividend but for their M&A premium. The key to profit, I argued, was to own the bank being acquired. The trick is figuring out which is which. Mergers in this space are rising due in part to the costs imposed by Dodd-Frank.
Maybe it’s only rhetoric, but perhaps the candidates should be reminded of the number of bank failures pre-Dodd-Frank and if Dodd-Frank is repealed, what happens to the Basil accord and the US’s ability to compete internationally in the banking sector. Until then, I’m now following the race a little closer.