Speaker 1 (00:00):
Hi guys, I’m Tim Melvin. And welcome back to a better way to wealth. Now, today, I’m going to share a secret with you that has created some very large fortunes over the last 30 years. And since I learned it 30 years ago, I’ve made a lot of money with this myself and for the members of my global network. So most of you are not going to take advantage of this secret. You’re going to say, oh my God, Tim, that is just too boring. I’ve got to look for the next magical tech company or the next wiz-bang trading system. That’s going to solve all the problems of the world and you’ll go on. You’ll get the results that you’ve always gotten. Those of you who take this secret and run with it are going to make a lot of money. So here’s the secret buy bank stocks see told you just lost a whole bunch of you. Oh, that’s so boring. Banks are off of there too. Or banks are too complicated. I can’t invest in banks.
Speaker 2 (00:54):
Here’s the thing, guys,
Speaker 1 (00:55):
When you’re investing in smaller, medium sized banks, they’re not complicated. They take in deposits. They lend money. Yeah. JP Morgan Citi group, they can get pretty complicated, but we’re not dealing with those. I’m going to give you three strategies today, and then we’ll give you three picks for each one. Pick for each strategy tomorrow, I’m going to lay out the rules. I’m going to give you the actual rules that we’ve used to make an enormous amount of money over the last 30 years. If you take them and use them, I’m telling you you’re going to make a lot of money. So here we go. First strategy. You want to buy small banks, okay? We’re not dealing with city group or any of that. We’re going to buy banks that have less than $1 billion in market cap. These are small anywhere from a two branch bank.
Speaker 1 (01:41):
I just didn’t. I bought a two branch bank this morning as a matter of fact but you know, up to, you know, maybe a hundred branches, they’re not big banks is my point of view. And what’s going on here has been going on since the eighties and will continue to go on is the industry’s consolidating. We’ve gone from 18,000 banks to 6,000 banks. Eventually there’ll be about a thousand banks. We just don’t really need that many banks. The consolidation happens at higher than current market prices. So there’s always a pop from the takeover. So here’s our rules, small banks, less than a billion dollars of market cap. We have to be so price sensitive here, guys, the takeovers are happening today at about one and a half times book value. So we want to make a bunch of money off this. We’re only gonna pay 85% of book value for the banks that we buy.
Speaker 1 (02:33):
Now that’s gonna limit our universe. We’re not going to have a thousand stocks in this portfolio. Like right now, when I ran the list, there’s was about 20 of them that met all of my criteria in the entire United States. So now we’re going to buy 85% of book value, small bags. Yeah, we want, we don’t want to lose money banking. You know, bankers make mistakes. So we want to make sure our banks are safe and it’s not possible for us to suffer, suffered financial distress or loss. So we’re only going to buy banks that have, what’s called an equity of assets. The ratio of more than 0.1. Now that’s just for every dollar of assets that they have, which are loans. They have at least a dollar of equity. So they’re not super hyper leveraged. The way many banks were before the great financial crisis we’re going to have under leveraged banks, bought in a steep discount to book value, smaller banks.
Speaker 1 (03:25):
Eventually actually we think that you’ll get a takeover offer for most of the banks in the portfolio. That’s been our experience over the years. We get some that go out and they yeah. Think acquisitions of their own in order to grow the bank. And that’s great. I don’t care how I make the money as long as I make the money. Now here’s the thing about these small banks. I’ve never met a businessman, a successful businessman in a small to midsize towns. And I’m not talking about you wall street because there’s, I’m talking about the local contractor, that’s worth about 5 million bucks or the local realtor. That’s worth 10 to $15 million or the restaurant owner that’s worth a few million barks. I’ve never met one of those guys that did not have money in small banks. Usually the local banks in their area that they bought at low prices.
Speaker 1 (04:08):
These things can be a compounding machine in and of themselves. And there’s always the possibility of a takeover coming down the street, right? We’re going to buy them at 85% of book with the idea that eventually we’re going to sell this thing for somewhere around one and a half times. Book value. Guys just executing the simple strategy over the last 10 years just earned 28% a year over the last 20. It’s been about 20% a year. If you started this 20 years ago, every dollar you put in will be worth $3,928, $300. I’m sorry, will be worth $3,928 compared to that SVP. It’s fun. We always hear, but everybody’s suggesting you buy. We’re gonna only be worth 338. So you get 10 times your money with less volatility and less risk than others. I mean the overall index by just buying these small banks. Now moving along the second strategy also obviously involved banks.
Speaker 1 (05:04):
These are high dividend banks. This is great by the way, if you like or need income. So we’re going to break the world down. We’re only going to look at banks that are paying a dividend of at least 3% and trade for 12 times earnings or less. This is real simple. That’s going to give us a list of anywhere it’s been as low as I’m going to say 50, it’s been hi. I’s a couple of hundred stocks now. No, I don’t want you to buy a couple hundred stocks. What I want you to do. Okay? Because I want you to take the 20 stocks on that list that pay the highest dividend. And I want you to buy them. Those stocks rebalance this portfolio, every three to six months, you’re going to go make sure to stop. You’re still meeting the criteria. Those hit don’t, you’ll sell replace with the new ones to do very simple, very low risk strategy.
Speaker 1 (05:50):
29% a year over the last 10 years, 23% over the last 20. So a hundred dollars. Here’s the magic of compound. He bumped up that return a little bit, $12,649 for the the bank dividend straps. First it’s about the same, a 330, $38 in the S and P 500 index fund. So this absolutely works. It works extraordinarily well. That portion of the portfolio, there’s only 20 stocks. You’ll be able to stay invested most of the time, the small bank strategy. Lot of the times there’s only four or five are those rounds now right now is just said, there’s plenty. When you’re going into extreme valuation, overvaluations like 2007. There’s just simply nothing to buy. So that also helps you keep, it keeps you out of trouble and away from bad markets. Now, the third strategy we talked about a few weeks ago, that’s buying thrift conversions.
Speaker 1 (06:45):
When a mutual bank converts into a stockholder, it is a value creation opportunity. A dollar of equity becomes almost magically. We’re 15 or $20. So here’s the simple rule. We’ll make you a ton of money. If you see a thrift conversion and offering being done, and it’s real simple to find these, I mean, a, you can always sign on you know, listen to me because I’m always telling my paid subscribers, Hey, there’s a deal coming. We got to look at this and be ready for it. Here’s the price you want to buy these at 80% of book or last, when you can get them at that valuation, you jump in, you buy the stock and you hang on because good things are going on. It happened. And it’s going to make you an enormous amount of money. Now that’s my three strategies. They’re really simple.
Speaker 1 (07:30):
The rules are not complicated. This is not a complex trading system where, you know, we need super computing power to run all the algorithms. They’re very simple rules. They’ve made a lot of people, an enormous amount of money guys were talking. What about the type of returns that it buffet isn’t even earning 29% a year over the last decade? Peter Lynch’s came the closest. He earned 29%, 13 year run the head of fidelity Magellan fund. Here’s a little secret. He owned almost. Yeah. So for thrift bank in the United States and he paid, huh? Move around less than 85 cents on the dollar of book value, he was using the same basic strategy the same basic three core strategies to provide the kind of returns he did. These three strategies can make you rich. If you use them tomorrow, I’m have three picks one for each strategy for you to evaluate, bring a pen and pencil, write them down. They qualify, they meet the rules right now. They’re free. You can buy the stocks or not. It’s up to you, but I’m going to give them to you tomorrow. Tim, Melvin, this has been a better way to wealth and thanks for watching.
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