Anthony Speciale Stock Market Analyst

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Mutual Thrifts

Speaker 1 (00:00):

Hi, Carter Clews here. And let me ask you a question. Can there really be one investment? That’s the best in the world. One investment that has the potential to actually triple your money. And like Tim says, even if there’s another great depression, you still want to lose a dime sound too good to be true. Well, in fact it is true, but there’s only one problem it’s boring. So Tim, tell me, do you think anyone really cares if it’s born, even if they’ve never even heard of it, as long as it makes them a ton of money,

Speaker 2 (00:31):

You know, shockingly Carter. Yes. they don’t pay attention to it because they think it’s boring. I’ve told a thousand people, thousands of people about this over the last 30 years and their eyes kind of glass over, they go right back to doing what they’re doing. Now, look, I don’t care how boring it is. This can double and even triple your money in a relatively short period of time. This is a technique that all of the best investors of the last 30 years have used and used extensively to earn huge profits. And I’ve used it myself and make quite a bit of money out of this simple thrift conversion, conversion trading strategy

Speaker 3 (01:10):

For a stem or us to death. It’s a small fortune on it, right?

Speaker 2 (01:19):

And there’s a very boring little subset of the banking industry out there. And they’re called mutual thrifts. Now mutual thirsts are in theory owned by their depositors. They’re very conservative. There are certain types of lending they’re. I don’t want to say prohibited from doing, but not encouraged, not to do much of that type of lending. Mostly they do one to four family mortgages and they buy municipal and treasury bonds with their depositors’ money. It’s extremely boring. Now, sometimes the bankers in charge, they, they want to get into more exciting businesses. They want to do commercial real estate and make loans to growing businesses. In order to do that, they’re going to have to change the chart. The best way to change the charter is to do a thrift conversion. What we’re going to do is we’re going to take this mutual thrift and we’re going to convert it to a stockholder owned bank through a conversion offering. Now, this is where this gets really interesting. And I’m going to use simple numbers.

Speaker 3 (02:21):

Let me, let me back off for a second, because now a mutual thrift, is that a banking or it’s a type of bank at some point?

Speaker 2 (02:28):

Absolutely. It’s a thrift bank that is, that is owned by deposit is it’s called a mutual thrift. They, there used to be one on every corner in America. There’s not quite as many today, but there’s still hundreds. And in order to grow, they are going to have to do a thrift conversion offering. And that’s becoming more obvious to everybody. We have 14 of these in 2021, five have been done. There’s still nine more great opportunities coming up this year to participate in this tray because then it becomes

Speaker 3 (02:58):

Public stock. Then I can invest. Right. Right,

Speaker 2 (03:00):

Exactly. Now here’s where this gets exciting. Okay. It’s owned by the depositors. They’re going to get first crack at buying stock. And I’m just going to tell you they’re going to buy all the stock, but the math gets just super compelling here. Okay? So let’s say we have a hundred million dollar bank and we’re going to convert it to a publicly owned thrift. We’re going to go out and we’re going to sell 10 million shares of stock at 10 bucks. And we’ve got a hundred million dollars worth of bank. We’re just taking in another a hundred million of cash. Now I pay $10, but I now have a $200 million bank and 10 million shares. Outstanding. My shares are now worth 20. Let’s take a while to trade all the way up to 20, but they’re going to trade up to 12, 13, $14. And I’m using simple numbers here, but that’s pretty much exactly how a thrift conversion offering works.

Speaker 2 (03:53):

Now, if we can come in here, we can pay 12 or $13 for this $20 asset. I’m going to do that all day. Especially since now it is a stockholder own bank and it you’re going to see the real possibility of larger institutions coming in and buying this bank. Let’s look at how that might work today. Okay. So we do a mutual thrift conversion offering. All right. We’re able to buy, let’s say in the aftermarket at we’ll call it 14 bucks and it’s worth $20 of book value. Okay. Takeovers being done routinely at one and a half times, book value in today’s market.

Speaker 3 (04:35):

Did I already buy in for 14 years for 14, but it’s worked, but I get 20 back. If I would sell it right away. No,

Speaker 2 (04:43):

You do not get your money back. Whether the assets are worth 20 bucks, the price of the assets will converge over time. Okay. All right. If somebody takes it over, they’re going to pay as much as 30 to take that back over. I like it. Right? So what you’ve basically got when you do a thrift conversion is you’ve got this conservative little bag that now has a ton of cash. By the way, it’s subject to certain rules. They can now use that cash to buy dividends, buy other banks or buy back stock. All of which are fantastic for the stock price and how grow that $20 value, you know, five, 10% every year. So if you get a takeover down the road, that price could be as high as $40 a share. Now here’s the best part. Okay. Remember I said, they can survive even a great depression.

Speaker 2 (05:30):

You’ve got this conservative little bank, it’s all one to four family mortgages. They’re probably done at a 70% loan to value because these guys are very conservative and you’ve got a lot of cash. Half of the value of the bank just came in in the form of cash. You can have a depression. It doesn’t matter. These guys aren’t going to fold. They’re not going to collapse. They simply have too much money. They’re in great shape. So it’s almost risk-free and you know, eventually is going to buy this bank. A lot of these thrift conversions are done specifically for that reason.

Speaker 3 (06:03):

So cut, sorry, triple. So I have a chance to triple my money on a $14 investment. Absolutely. And it’s also getting dividend.

Speaker 2 (06:12):

Okay. Yes. most, almost all of these will start paying a dividend with cash. So yeah, we did an offering this year where we paid a good price for the assets. We got probably a 25% discount off the actual value of the assets and we’re collecting a three and a half percent dividend again. I’ll take that all day and twice on Sundays. Cause I know that somewhere down the road, I’m selling that bank for two to three times.

Speaker 3 (06:38):

So I’m getting cashflow plus equity.

Speaker 2 (06:40):

Yes. That’s exactly what’s happening. Yes. So here’s we just finished up one and I’m going to go ahead and share it with you guys real quick. These things only take a couple minutes to talk about, cause they’re pretty boring. Little banks, my

Speaker 3 (06:50):

Little green book, green book,

Speaker 2 (06:54):

Community bank up in New York city. They’re headquartered in white Plains with branches in the several of the boroughs in the Bronx. And they have a couple of production offices up in Massachusetts. This is a little bank. They primarily do construction loans and they’re really good at construction lending non-performing assets are almost non-existent. They did an offering at $10 that created between 14 and $15 worth of value. We’ve been able to consistently buy this thing below $11 a share. This is a fantastic bank. It, it might be around three or four more years, but that’s it. This is a great portfolio of higher Yoni construction loans that fits into just about any other banks growth strategy. Somebody’s going to buy this bank. We’re buying at a big discount to book. They’re going to pay us a big premium to the book value of the bank. At some point in time, extremely low risk trade. They have an extraordinary amount of cash, great producing ax assets and a nice portfolio of municipal bonds and treasury securities, extremely low risk, massive opportunity, the symbols, any CB, and we’ve got nine more of these thrift conversion opportunities headed our way in the rest of 2021.

Speaker 3 (08:11):

Tim, thank you again. It’s something we can bank on for maximum profits, triple the money. And I appreciate it. Thank you. Thank you. Good talking then we’ll catch up again tomorrow. Excellent.