In this installment of "In The Arena," host Daryl Jones is joined by Financials and Housing analyst Josh Steiner. Josh has +20 years covering the Financials space and has no shortage of experiences and tips to share from his own journey including 5 years spent at Lehman Brother's, practice working on the buy-side and joining Hedgeye in its infancy.
Josh talks openly about his experience at Leham Brothers, one of his new best ideas (HINT: Visa) and risks to his thesis, the best 3 money managers (in his opinion), and his coverage of the housing space.
From bearish to bullish on Bank of America, here is a snap shot into the research thesis.
"The U.S. housing market, which had obviously come out of its biggest downturn since the great depression was actually poised for a sort of a double dip in the fall of 2010 and into 2011. So, we did a lot of work on that. We actually made what I think is maybe one of my best calls in my career on Bank of America, partly born out of that. September, October of 2010, we started digging into all of the sort of underappreciated exposures that B of A had in the form of a mortgage put backs. And we came to the conclusion that they had, tens of billions of dollars of exposure. And that in conjunction with them needing to raise capital levels to be Basil III compliant, we felt like they were going to have to raise capital and it became one of these very reflexive situations where, people sort of knew they had to raise capital and knew that all this sort of hard to quantify exposure. Um, and so the stock was just in this spiral. So I basically went from 15 down to five and then in, early 2012, we reverse course on it because at that point we felt like we had an edge on a number of fronts and we got bullish on B of A and then they actually wrote it from five back up to 17."
Josh describes Hedegye's housing philosophy and what he and his team do differently to help make things as easy as possible for investors.
"I think there was a poor understanding, a lot of confusion around how to correctly understand and synthesize all of these different data inputs and come up with a correct and accurate understanding of what the housing market was actually doing. Over time what we've done is refined that to really incorporate a number of different fronts. I think the macro teams quad framework is very helpful in thinking about the housing market. I also think we've done a tremendous amount of work around the role that rates play and housing and being very specific with that, both in magnitude of impact as well as a timing standpoint. That's really how we've approached the sector and I think a few of the things that have we've helped a lot simpler for investors."