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  1. #1

    Default SIVB ==> The Shark Week Winner

    Back in the day, they used to call California the Gold Coast. More recently they have called it Silicon Valley. They don’t really make silicon there anymore, instead its all the tech companies like Google, Facebook and Apple. Having said that, no matter what you call these companies, they all need money. What could be a better source of money than a bank made of silicon! You might remember the Star Trek episode where the Horta was made of Silicon. No Kill I.

    Today I bought stock in Silicon Valley Bank (SIVB) at 548.33. I will sell it in 4 – 6 weeks at 633.33. Here’s why I like SIVB:

    At the end of the day, this company is a pure earnings machine. Thriving innovation markets and strong execution continue to drive its extraordinary growth. It’s amazing that a bank of this size can continue to grow at this pace.

    • Total client funds reached $329B (+73% YoY) as accelerated VC investment and continued strong public fundraising and exits fueled client liquidity.
    • Robust 8% QoQ loan growth supported by strong PE investment activity and borrowing by technology and life science/healthcare clients
    • Accelerated investments to advance strategic priorities given significant outperformance and compelling long-term growth opportunity
    • Closed acquisition of Boston Private on 7/1/21 to grow private banking and wealth management business

    SVB Financial Group, a diversified financial services company, provides various banking and financial products and services. The company operates through four segments: Global Commercial Bank, SVB Private Bank, SVB Capital, and SVB Leerink. It operates through 30 offices in the United States; and offices in Canada, the United Kingdom, Israel, Germany, Denmark, India, Hong Kong, and China. SVB Financial Group was founded in 1983 and is headquartered in Santa Clara, California.

    If you compare SIVB with its regional bank competitors, it makes all of them look like its girlfriend. SIVB posted a HUGE fourth quarter and obliterated ANAL-yst expectations. Net interest income outperformed on surging loan and earning asset growth and the bank recognized significant investment gains. Earning assets and deposits grew by more than 50% on a year-over-year basis, and SVB management is looking for loan growth "in the mid-20%s" in 2021. Any way you slice it, it was a very strong quarter.

    If you look at all of Silicon Valley’s primary lending markets, this bank has an over 50% share in these areas. It is the 800 lb gorilla. That’s insane when you consider the number of players in this space. If you ask Mark Zuckerberg (you know the guy who looks like Data on Star Trek) which bank is his favorite, he would turn to SIVB because it is the bank of choice for tech/life science companies. This is why this bank separates itself from the rest of the lenders. It’s the tech…tech…tech. Look back over the last decade and look at what companies are growing like crazy…that’s right…tech tech tech. Because of this, SIVB stock is up 131% in the last 12 months. That’s not at all bad for a company with a PE of only 16. That’s right, this behemoth bank is growing like a baby tech but its valuation is cheap cheap cheap. Venture Capital investments rose 13% in 2020, and this lending company resides in the petri dish of tech companies who beg for VC money every day. SIVB is going to have over 2 billion dollars in PE and VC investments this year, up from 1.7 billion last year. Globally, there is over 277 billion dollars of VC capital waiting to be deployed and over 1.3 TRILLION dollars of PE money. This is rocket fuel for the tech companies that SIVB will have as clients (or already has!). Their vision is to be the most sought-after digital-age partner helping innovators, enterprises and investors move bold ideas forward fast. I love it! What a big ass goal. The strong PE investment and borrowing by technology and life science/healthcare clients continued to drive robust loan growth and they expect FY’21 average loan % growth in the mid 30s!

    How can you argue with 51% year on year growth in average earning assets and 54% growth in average deposits??? It’s cray cray. But why would anyone expect anything different. 88% of assets are in high-quality investments and low credit loss experience lending. If you look back over the last 10 years the company has consistently seen 20% annual growth.

    They have provided their customers with

    • End-to-end digital banking

    • Technology platform upgrades
    • Strategic partnerships to accelerate product delivery

    As long as interest rates stay low, PE companies will continue to invest in tech and SIVB will continue to nurture this growing space with its lending capital. And you know what? They are well-positioned for rising interest rates as well, if that ever happens to tamp down inflation. Either way, the client conga line will continue and this will go on for a while, since Private Equity is loaded with dry powder waiting to be deployed. Last quarter, loans were 13% higher than projected and deposits were 17% higher. This is double digit growth for a behemoth size financial institution. They are averaging 10% client growth every year. Very impressive.
    The Boston Private acquisition will bring a rock solid and very profitable wealth management and private banking business to Silicon Valley. With their free cash flow, this is an area that they can really expand and enrich.

    Return on Equity for the first half of this year has been 24%, compared to 14% among its peers. SIVB laughs like Brutus the Barber Beefcake at its competition. The investments that the company has made to enhance and diversify their business have helped drive earnings through rate and economic cycles. The multifaceted capital deployment has immunized this company from any specific market based calamity. In other words, Silicon Valley Bank is a safe bet. They have a looooooong track record of strong underwriting and resilient credit performance. The company is raising their FY’21 growth outlook as economic conditions improve and strong tailwinds continue to support the innovation economy. Their flexible liquidity management strategy supports strong, profitable growth. This increased growth outlook provides opportunity to accelerate investments to drive and support long-term growth!

    So you don’t have to go to Vero Beach to get your silicon. You can get it right in the stock market with the SIVB ticker. With the quatloops you make on this investment, you’ll be able to hang with the Titans when they crash Vegas this fall. Jaaa Jaaa jaaa Jaaa!

    I am HUGE!

    $$$MR. MARKET$$$
    Last edited by mrmarket; 11-01-2021 at 09:43 AM.

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  2. #2
    Join Date
    Sep 2003


    Awesome writeup, $$MM! SIVB looks great!

    I'm in with you at 548.

  3. #3
    Join Date
    Jun 2009


    Mr. Market,
    Yes, I See. SIVB and it is a great pick!
    Up nicely and not too late to jump in!
    Keep on keepin' on; -Adam

  4. #4
    Join Date
    Sep 2003


    just sold some SIVB here at 624 for a 14% gain! (Holding out for 633 and 15% with the rest of it)

    Thanks for this awesome pick, $$MM!!! YOU ARE HUUUUUUUUUUUGGGGGEEEEEEEEE!!!!!!!

  5. #5
    Join Date
    Jun 2009


    Closed at $642.15; well beyond the goal.

  6. #6
    Join Date
    Nov 2016


    Thank you again Mr. M! I’m still in SIVB +9% in 6 days will exit soon.

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