Anchored Down in Anchorage: NRIM – QAV America #55

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QAV AMERICA 55 CLUB VIDEO

[00:00:00]

Cameron: Well, welcome back to QAV America, Tony, episode 55. It is the 2nd of June, 2026.

Tony Kynaston: And the

Cameron: Tony,

Tony Kynaston: are open

Cameron: no they’re not. no. In fact, I

Tony Kynaston: on

Cameron: read this

Tony Kynaston: and

Cameron: I read this morning that the Iranian negotiators have walked away from the table in, uh, Pakistan. Um,

Tony Kynaston: Entitled

Cameron: ” This is a waste of time.” Yeah. And the same day in The New York Times, Trump said they’re very, very close to a deal and it’s all going terrific, and the Iranians are basically can’t wait to do a deal.

And then in somewhere else, BBC I think, it said the Iranians had walked away from the table

Tony Kynaston: Well I saw a headline last week that Trump was about to go into the situation room to make a final determination

Cameron: Yes

Tony Kynaston: must have been to put out a tweet Finally [00:01:00] determined to put out another tweet

Cameron: Apparently he forgot to notify the Iranians that, uh, he was making a final determination because they’re not interested. Who he’s negotiating with remains to be seen because I also see the President Pezeshkian is offering to resign because he can’t get anything done because the hardliners from the IRGC are sort of running things.

So anyway, it’s a, it’s a bit of a mess. Um, well before we get into my Pulled Pork, Tony, I just wanted to talk about some, uh, market news from the US and also go over our portfolios, ’cause our US portfolios have taken a big hit in the last three weeks, four weeks. And I did some analysis last night trying to figure out why.

Not that they’re doing badly, but they’re not doing as well as they were doing. So I’ll start with the light portfolio, which we started in late December last [00:02:00] year. It’s currently up about 6.5% versus the S&P up 10.5%. We were up 12% versus seven on the 6th of May. So we’ve lost half of our gains since then.

Tony Kynaston: Mm-hmm

Cameron: And, um, I had a look at the stocks and which ones had gone backwards and which ones hadn’t, and it’s b- I think it’s basically all, uh, oil related, was my final analysis. Um, giving back some war premiums. Um, you know, the, the bit of froth that the portfolio had. Like it was up 10% after four or five months, and a lot of that.

Uh, we have a fairly high concentration in the light portfolio of oil related stocks because that’s what was showing up on the buy list,

Tony Kynaston: Yeah

Cameron: over the last five months, so that’s what we bought.

Tony Kynaston: Yep

Cameron: And obviously the oil pr- the oil price took a big hit in [00:03:00] May as Trump, uh, teased us with this idea that there was gonna be peace in the Middle East and the Strait of Hormuz was gonna open.

I think, uh, WTI finished the month down like 17, 19%, something like that. $87 I think it finished May. Brent was down to 91. They were both off about sort of 20% from their 2026 high. And our portfolio’s about 43% invested in energy stocks, so they’ve all come back as a result

Tony Kynaston: Mm-hmm

Cameron: But as I said, they’re still up and, you know, obviously it’s not over yet.

So they could go, those stocks could go back up 20%, uh, tomorrow the way things are going, so. But it’s interesting because we’re so concentrated in energy stocks, the market is hitting records. [00:04:00] S&P hit records north of 7,500, ninth straight up week, uh, despite the fact that the US economy looks like it’s heading towards stagflation.

I’ll get to that in a minute. But so our stuff fell while the broader market rallied. Cheaper oil everyone got excited about, uh, but not good for our stocks. So look at BWLP, the LPG company that I added a couple of weeks ago, was actually the worst of the lot, down 4.5% yesterday. Cord Energy, EcoPetrol, Neighbors, Murphy Oil, all oil and gas names were down.

The tankers not offshore and BWLP again as a sort of a second layer for them. When Hormuz was shut, freight rates spiked, as we talked about when we did, um, the LPG company, because everyone had to reroute. If it, if it reopens, that spike normalizes and ships are already repositioning across the Atlantic apparently [00:05:00] to take advantage of the strait opening.

And there are. I have heard rumors that the US Navy have, have been, um, shepherding ships through the strait, but I don’t know if that’s real or if that’s just more fake news from the region. But anyway,

Tony Kynaston: numbers even

Cameron: tanker analysts. No, I mean, I’m talking, you know, handfuls of ships. There’s still mines that have to be cleared up and all that kind of stuff.

Tanker analysts are still split as far as I can tell on whether reopening sinks rates or supercharges them. So there’s still a lot of flux to go on in this space and no one knows where oil’s going. No one knows what’s happening. The, the ceasefire seems to be held together with sticky tape if, if it is in fact still there.

And Israel seems to have continued to be bombing the hell out of Lebanon. I see Trump today said that he’s got some sort of agreement from Israel that they’re gonna cut it out, but, you know, that’s worth the, uh, [00:06:00] paper that it’s written on as we know, so

Tony Kynaston: Sure we’ll cut about Sure Yeah

Cameron: Yeah. So that’s the light portfolio. The dummy portfolio, uh, for all time is, uh, which, you know, we started it in, uh, September 2023. It is currently up 94% versus the S&P up 71%. So we’re outperforming quite well, but we were up 130% a couple of weeks ago, a few weeks ago, uh, versus the S&P which was up 63. So we’ve gone from double market down to being up 20 points or something like that.

So this is a bit of a different animal. Uh, again, it’s sort of froth coming off a high, not damage to the portfolio, and half the book here just in recent weeks is still green. But I think some of this one is profit taking. So we have shipping. [00:07:00] Four of the stocks that are down are shipping companies. Again, you know, we’re sort of heavily invested in shipping and financials is basically the split of this portfolio.

So the shipping one again connects to the oil story, but it’s broader than oil. I think the Middle East potentially calming down is bleeding the disruption premium out of all shipping, not just tankers, ’cause we know that, you know, it’s been, um, not just for oil tankers a problem with the Strait of Hormuz, but then you also have tankers that, uh, are charging premiums to get stuff around the place.

It’s been a heyday for shipping companies of all sorts in the last, um, four months, five months because they’re having to take longer routes for stuff.

Tony Kynaston: Yeah

Cameron: So our four carriers, Tsakos, we’re all tankers, StealthGas who are gas carriers, uh, carriers, not [00:08:00] offshore. Um, same Strait of Hormuz story as the ones in the light portfolio.

And then the container one, Euroseas, is off about 2.3%. Different waterway, but the same logic. The Red Sea and the Suez are reopening. Ships go back to the short route and all that capacity coming back has shoved long term container contract rates down to the lowest before the whole Red Sea crisis kicked off, which is, uh, different to the Hormuz crisis, but it seems to be opening up as well.

So peace is bad for business if your business is getting paid to sail ships the long way around essentially

Tony Kynaston: Yeah it’s interesting Cam because

Cameron: The other

Tony Kynaston: all of what you said is true but one thing that’s still in the back of my mind is we haven’t seen the figures yet on what the mo what what the shipping down what the shipping clog has meant to their profit So you know I [00:09:00] think people who are selling now maybe they are doing the right thing and taking a profit but they’re we haven’t seen the numbers yet I mean there’s gonna be outsized profits I would’ve

Cameron: Yeah

Tony Kynaston: this half from those companies as well and and does that change people’s minds

Cameron: Yeah, so when those numbers come out, these things could get a tick up again, you’re saying?

Tony Kynaston: Yeah

Cameron: That’s a good point

The other story with our dummy portfolio is, uh, RenaissanceRe, RNR. Nothing to do with oil. This one’s an insurance company. And the 1st of June is the big midyear reinsurance renewal date, and the renewals came in soft. Apparently, property catastrophe rates are down 15 to 20% in the US. Florida’s down closer to 20%, which is the sharpest fall since 2014.

Apparently, uh, too much capital has flooded into the sector, turning it into a buyer’s market, and that’s affected reinsurers’ pricing power. So different driver from the, from the war related [00:10:00] stuff, insurance based. Um, Willis Lease is down 3%, and I can’t find any underlying reasons for that. These are the, um, aircraft engine leasing guys.

I think that’s– We know they’ve been up, like, 300% at one point. They’re currently up 260% since we bought them. So I, I do think there’s a bit of profit taking maybe in that. Um, and the lenders and the banks that we hold, Anova, Regional Management, UBS, and Jackson are all up. So they’re doing well despite all of this So that’s sort of the portfolio story.

Um, the US economy, as we know, it’s a one-trick pony over there at the moment. Um, sort of Nasdaq was up 8% in May, but if you strip out all of the AI names out, the whole thing’s basically gone nowhere [00:11:00] since February. AI stocks are now 45% of the S&P’s entire market cap,

Tony Kynaston: Wow

Cameron: which is just insane. So when people say the market, when, you know, Trump says the market’s at all-time highs, there’s a dozen companies that are propping the whole thing up and, uh, the rest of it’s basically along for the ride and not doing that great.

You know, the, there’s a lot of problems in the economy over there. Uh, uh, when Anthropic and OpenAI float, which is sort of happening at the moment, they’re going through the process of getting ready for that. I’m sure that’ll be another sort of hysterical bump in that end of the market, but, um, stagflation is where I think things are going over there, uh, and it sort of doesn’t hit with the everything’s going great narrative that the Trump administration like to push.

Inflation’s running at double the Fed’s 2% target, [00:12:00] and the jobs market seems to have stalled. The latest numbers from April was 115,000 jobs, um, and it seems to be going backward. Payroll, they were– I think those were job ads. Payrolls have basically gone nowhere for a year. February went backwards.

Unemployment’s at 4.3%. Hiring is down. Um, so we’ve got slower growth, faster inflation, and now Powell’s out. Kevin Warsh is in, who was sworn in on the 22nd. Confirmed 54 to 45, which apparently is the narrowest margin in the history of the job. And I read up on him a little bit more. Apparently, he’s traditionally been an inflation hawk.

Tony Kynaston: Hmm

Cameron: So, uh, apparently his first stint at the Fed, he left over quantitative easing, thought it was the wrong play. He’s, um. And Trump’s brought him in obviously to [00:13:00] cut interest rates at a time when the economy is slowing down. So it’s gonna be interesting to see how that plays out. Got any thoughts on that?

Tony Kynaston: Oh uh I think you summarized it very well It’s It’ll be interesting to see what happens to Warsh because he’s a bit like J.D. Vance They’ve become They’ve come from being Trump critics to being Trump acolytes um perhaps just to get a job I don’t know what Warsh’s re uh motivations are But yeah if he cuts rates now he’ll be at odds with all the published uh all he’s published in the past Maybe he’s had an epiphany But um yeah Uh I mean to There’s an argument to say that they should be raising interest rates because inflation is up Um that will make unemployment go up So there’s a lot of moving parts to go through in the States but I would have thought the last thing they need is an interest rate cut over [00:14:00] there Um the AI front I think uh it’s you know it I’ve thought it’s been in the bubble for a long time now as you’re saying if it’s forty-five percent of the market when that bubble bursts and who knows when that will be it’s gonna be a it’s gonna be a big downturn in the US uh stock market which will be you know I hate to use the word but devastating for um for the index And as we talked about in the Australian show just recently their dotcom bubble um wiped out a lot of companies and and saw big downturns in stock markets and this is starting to smell exactly like a dotcom bubble to me Um I don’t know what the percentage of the stock market dotcom companies were but um know having having even one sector forty-five percent of your market is concentrating yourself into into a corner really And as soon as that side even if if it’s a bubble it doesn’t burst As soon as it stops growing the US market’s in big [00:15:00] trouble

Cameron: I did some analysis on the P/Es of the Mag Seven a week or two ago, ’cause I was looking, um, I was comparing it to when I worked at Microsoft before the bubble burst, dot-com bubble. Microsoft’s P/E in late ’99 was running at, I think it was about 75. Um, when I looked at the Mag Seven today, most of them are sort of in the 28 to 50, 55 range.

So not as high as Microsoft was back in the day. And, oh, a- and Tesla’s the outlier. Tesla, when I looked at it, was a P/E of 355. So

Tony Kynaston: Mm-hmm

Cameron: leaving that one out, the rest of them aren’t as bad as Microsoft was. And, you know, Microsoft wasn’t a bad business in 2000. It was, it was a great business, and it continued to be a great business, continues to be a great business.

Was making money, market share dominance, all this [00:16:00] kind of stuff. Uh, so it’s. But it’s not. But their share price collapsed and took, I think, 15 years to get back to where it was, not because it wasn’t a good business, not because it wasn’t making money, because it was overvalued at the time, regardless of, you know, what kind of a good business it was.

So, uh, you know, I think that these companies that are behind the AI boom, some of them at least will continue to do well. They’re good businesses. They make money. Google’s not going away. Microsoft’s not going away. Meta probably not going away. But the point is, are the, are they, can they justify the sort of valuations that they have,

Tony Kynaston: Correct

Cameron: and you know, how they will hold up?

So

Tony Kynaston: And there are s I mean there are all there are articles all the time in the paper these days saying that uh are starting to question the value they’re getting out of paying for AI Um [00:17:00] local area communities are trying to block data centers from being built So it it’s not gonna be smooth sailing for the Mag Seven going forward I wouldn’t have thought and it’s usually a couple of speed bumps which derail high PEs and bring them back to a more reasonable level and they could be close

Cameron: And I still think, you know, China’s gonna catch up and, um, I don’t know if we’ve talked about this on the show, but there was a story when Trump was meeting with Xi a couple of weeks ago. Um, Jensen Huang from NVIDIA went over along with all the other tech CEOs, and there was a story how, you know, the Biden administration banned China from buying NVIDIA’s H200s.

And Trump, when he got in, uh, got rid of that ban and allowed China to buy them. Jensen Huang convinced him that it was, for some reason, better for the US if China was using American chips rather than Chinese chips. And no Chinese company has bought them, even though they can buy them, because Xi told them all, “No, we don’t wanna be relying on American chips.

Uh, build our own.” So there’s been a huge amount of focus and investment in China to catch up to NVIDIA. I don’t think they’re there yet. They probably won’t be there for a while, but I feel pretty confident they’ll get pretty close pretty quickly. So

Tony Kynaston: All

Cameron: yeah

Tony Kynaston: do is buy one chip then just go out and mass-produce it themselves

Cameron: Yeah. So anyway, the other thing that’s, uh, happening over there is the tariff bill, I think, is coming due. Manufactur- you know, the, the tariffs were gonna bring manufacturing back to the US. Um, manufacturing is apparently shedding jobs. Had somebody say to me a couple of weeks ago, “Oh, everyone’s onshoring manufacturing again.”

I, I tried to find evidence for that and I couldn’t. In fact, I found the opposite. Every study I saw said that manufacturing in the US is still shedding jobs. Small businesses are wearing the, uh, the cost of the tariffs the [00:19:00] worst. They’ve been losing jobs for 13 months straight because of the impact of tariffs on their business, and tariffs have worked out to roughly a $1,500 a year tax on the average American household.

So, it’s a great day in America. Make America great again. It’s going so great.

Tony Kynaston: You

Cameron: So great

Tony Kynaston: dollar bill with Trump’s face on it now for um $100 probably I don’t know what they’re charging for it but yeah

Cameron: And a f-

Tony Kynaston: can go along to the 250th

Cameron: phone

Tony Kynaston: hear

Cameron: and a watch. He started selling, started selling Trump watches too, so you can tell what time and time it is and how great it’s going by your watch

Tony Kynaston: to the nearest next uh bubble burst Yeah look I I hate to predict

Cameron: They

Tony Kynaston: I remember in the dotcom boom days that the boom went for probably a good two years after everyone thought it was silly Um but people kept buying

Cameron: Yeah

Tony Kynaston: Uh there’s It uh

Cameron: [00:20:00] Che

Tony Kynaston: years Who knows But um yeah

Cameron: Yeah

Tony Kynaston: disconnect both in the stock market and the economy between AI and the rest of the place And the rest of the place I think is struggling

Cameron: Well, speaking of struggling, uh, I’ll get into my Pulled Pork for the week and I struggled to find something. Um, I went through a bunch of companies trying to find something to talk about this week. There’s a lot of companies on the buy list,

Tony Kynaston: Mm-hmm

Cameron: but all the top ones were either ADRs or they had these weird look.

They were financial services companies with these weird looking Pr/OpCafs we’ve seen crop up lately, where they’ve brought in a bunch of capital and it’s ended up in operating cash flow for some reason, or they’ve sold off something that’s turned up in operating cash flow. So this one that I’m gonna talk about is about a third of the way down my list.

That’s how far I had to go down, like 30 stocks before I could find something to talk about. It’s a company called Northrim BanCorp. Ticker code is NRIM. They’re on the Nasdaq. [00:21:00] And, uh, you heard of these guys before, Tony?

Tony Kynaston: I have not no North Rim

Cameron: You ever, you ever lived in Alaska, Tony?

Tony Kynaston: Alaska I have not been to Alaska no I did

Cameron: You lived close to Alaska, but not in Alaska.

Tony Kynaston: set in Alaska That was a good series That’s as close as I’ve come

Cameron: Well, those characters, those characters in that, at that Jodie Foster series would’ve probably known who Northrim were. They’re basically the bank of Alaska these days. Um, they are, are very boring, Tony. Um, boring, boring, boring business and, you know, we l- we like boring.

We like boring businesses.

Tony Kynaston: don’t have to decide whether AI’s gonna burst or not with a boring business do you Keep it simple

Cameron: Yeah. And banks are boring enough, but this is a bank in Alaska, so it’s about as boring as you can get, I think. No disrespect to people living in Alaska.

Tony Kynaston: No

Cameron: I’m sure it’s [00:22:00] very beautiful the three weeks a year you have sunshine. Um,

Tony Kynaston: Which lasts

Cameron: so

Tony Kynaston: day The

Cameron: yeah. Yeah.

Tony Kynaston: yeah

Cameron: That’s right. Um, now I, I do want to point out before I start that it is a Josephine today.

It dropped about 70 cents overnight. Wasn’t yesterday when I added it to our portfolio, but it is today. Um, market cap of about 550 million US dollars, so relatively small by US standards. Share price is around about 24 bucks today. They opened in Anchorage in December 1990, so they’re only about 35, 36 years old, and they were set up to be a local alternative for Alaskans.

Alaska’s banking up until that point had been dominated from the banks down in the mainland part of the USA, which Alaskan banks call Outside banks with a capital O, [00:23:00] apparently. And Northrim’s whole deal is, “We’re local people.”

Sorry, were you gonna say something?

Tony Kynaston: I was just gonna say it sounds like Far North Queensland doesn’t it The other

Cameron: It does a bit, yeah.

Tony Kynaston: Mm-hmm

Cameron: Yeah. Do you ever watch that, uh, League of Extraordinary Gentlemen British sitcom series that Mark Gatiss was part of?

Tony Kynaston: Yep

Cameron: They were, they were– The u- the undercurrent was they were all cannibals eating the tourists that came to town. The butcher shop was selling, like, uh, at the back room selling tourist meat to the locals, and they were like, “This is a local shop for local people.”

Anyway, uh, that’s what these guys are. So they, they, they’re the local bank with local people, and they will lend to Alaskans that the big banks from the rest of the US won’t lend to, essentially.

Tony Kynaston: I think some of the big

Cameron: so for those-

Tony Kynaston: but what I saw their niche was also they [00:24:00] understand the local marketplace So it’s I know we did a pulled pork on Bank of Queensland here they had a bit of a a niche because they were operating in Queensland so they understood the local industries which were basically agriculture But I think the the the proposition for this particular bank is that it understands um you know the oil fields in Alaska and the other Alaskan businesses up there and can pr can provide local services to businesses that really help them

Cameron: The h- how to survive with vampires and zombies in the, um, six months of night that you have. Shout out to, uh, uh, my old mate who was the artist for the comic book 30 Days of Night, which was set in Alaska, Ben Templesmith. He lives in America these days, but he’s from Perth originally. Great comic book, great art.

He, the, sees a picture on my wall he did as a custom for me. You can’t see it unless I turn [00:25:00] my phone. I’m not gonna do that. So, um, okay. So a little bit of, uh, Alaskan history for people. I know we have a bunch of Australians that listen to this show, s- so f- excuse me if you’re an American and you know all about this, but for the rest of us, it only became a US state in 19.

No. Yes, 1959? No, that can’t be right. 1959? 1859. No, 1959 must be right. Is it really 1959? Just before Hawaii. When did Hawaii become a state? I guess they were, they were a, uh, a territory before that of some sort. Uh, bought off the Russians in 1867 for $7.2 million. Seward’s Folly, they called it, after the Secretary of State who did the deal, who is, uh, related to my good friend Michael Seward’s, uh, down in Melbourne.

He’s the CEO of, uh, the bus company that takes you from the airport to the city. [00:26:00] Uh, shout out to Michael if he’s listening. Then the Americans found gold and oil in Alaska, so didn’t look like it was a folly anymore. Turned out to be a pretty good deal. The whole Alaskan economy basically rides on two things, oil and money flowing up from the federal government.

And hold that thought because it, it matters later on. So the core business of Northrim, the three basic engines. Engine one, the big one, is basically community bank. Takes deposits from Alaskan households, fishing operators, oil services, contractors, small businesses, et cetera, then lends it back out. Core banking business.

About 77% of their profit comes from that. Net interest margin’s about 4.77%, which is pretty good because the average little American bank gets about 3.5%. So

Tony Kynaston: Mm-hmm

Cameron: [00:27:00] they’re earning a full percentage point plus because I guess they’re locals for local people. They’re able to. And they’re up in the darkness, and they’re able to charge more.

It’s too dark. People can’t see what they’re agreeing to on the forms in the middle of the night.

Tony Kynaston: They turn the heating down

Cameron: Yeah.

Tony Kynaston: you make you deposit

Cameron: Too cold to read the forms.

Tony Kynaston: can leave Yeah

Cameron: And e- engine number two is home loans. Uh, they write the mortgage and then usually sell it on within weeks, keep the right to service it, collect the monthly payment, take a little clip.

That’s a pretty good little business. They’re servicing about $1.6 billion in loans. The most interesting part of the business, though, is the third part. In late 2004, they bought a business called Sallyport Commercial Finance for about [00:28:00] 54 million, and Sallyport does something called factoring.

You know what factoring is, Tony?

Tony Kynaston: Yeah So if you have a lot of trade receivables you uh you bundle them up and sell them to the bank and they pay you usually pretty high like eighty-five ninety percent for that receivables you you you get guaranteed cash flow if you run a small business that needs factoring and then the bank goes and tries to collect all the money back and make a margin on and what it gave you uh from your receivables That’s factoring

Cameron: Yeah. So it reminds me of like a debt collection business, but it’s not

Tony Kynaston: much

Cameron: debts, it’s just, but it’s just, yeah, um, outstanding terms, long-term receivables.

Tony Kynaston: Hmm

Cameron: Uh, now the yields on this business are 27 to 36%, apparently. So it’s a profitable little business. Um, the flip side is they write off more of it, apparently.

Tony Kynaston: Mm-hmm

Cameron: And [00:29:00] they operate this one, though, across the US, Canada, and the UK. So Sallyport went from a $1.8 million profit in the year that they bought it to over $10 million in the following year. So I guess they bought it and then expanded it right across their operations and across a couple of different, uh, countries.

Um, profit was up 75% for the company from 2024 to 2025. This is, this is for the whole business, not just Sallyport. It’s sort of the headline for this. Net profit jumped from 37 million in 2024 to 64.6 million in 2025. Now, this is partly a one-off. In the third quarter of 2025, they sold off some assets of a wealth advisory business that they had and booked a $14 million gain for that.

Uh, if you [00:30:00] strip that out though, the real earnings power is about $2.38 per share, which is actually the normalized EPS that you’ll see in Stockopedia, so that checks out. But the proceeds from the sale didn’t end up in the Pr/OpCaf like we’ve seen with other businesses, like I think it was TriMas, TRS, that we looked at a few weeks ago.

Uh, they put this through on the investing line, not on, uh, the, um, operating line. So the operating cash flow that you see in Stockopedia is ridgy didge, which is an Australian term for real. Sorry, Americans. Um, it’s not a fake Pr/OpCaf number. The real. There’s a couple of risks though with these guys. Uh, the credit side of things is starting to wobble.

Bad loans crept up from 0.35% to 0.6%, and their team is flagging the loans business as risky. The actual losses are still tiny, but they’re forecasting that they could get bigger [00:31:00] over the next 12 months. I guess for the same reasons we were talking about before, the US economy is starting to struggle unless you’re an AI company.

And I think they’re sort of flagging that it could be, you know, they could see losses increase in the next year or two if things go awry, if inflation keeps going up and the economy keeps stagnating

Tony Kynaston: The banks in Australia are starting to write up their provisions for bad debts Um and part of it is

Cameron: Right

Tony Kynaston: rate rises which haven’t happened in the US yet So if they all if they do get interest rate rises on top of other things which are affecting the economy oil prices tariffs whatever yeah it could be a um an increase in bad debts for these companies

Cameron: Typically they make more money off the loan book though, don’t they, when interest rates go up?

Tony Kynaston: So typically banks do well in a high interest rate environment just just simply because they’re making more dollars out of the same margin as the as the um [00:32:00] numbers numerically go up for the the percentage But yeah they do face increasing bad debts because of that as well

Cameron: Right. So that’s just how they manage it really, at the end of the day

Tony Kynaston: No exactly Oftentimes the best time to buy a bank is when it’s decreasing provisions on its loan book cause that’s just writing back cash um without having to sell one more loan So that’s a good thing this is kind of the reverse We have to balance the fact that the banks will do better in a high interest rate environment with the fact that they’re increasing their provisions for bad debt which is like writing profit to their own balance sheet rather than paying it out as dividends or reusing it to expand the bank So it’s a a bit of an anchor on performance

Cameron: Mm-hmm. Or bit of an anchorage on performance even in, in the case of these guys

Tony Kynaston: an anchor in an anchorage What was that song Tied Down no Anchored Down in Anchorage Yeah

Cameron: Beats me.

Tony Kynaston: Okay

Cameron: be a title, could be a title in there somewhere for the, for the episode. Um, but you know, what [00:33:00] happens to the economy in the future is outside of my remit. I’m, I’m not gonna that or how the bank reacts to it. The other risk is, gets back to something I said earlier, the whole bank is Alaska, basically.

Um, and Alaska is oil plus federal money. So if oil tanks, which it has been, uh, that could have an impact on the Alaskan economy and therefore the prospects of Northrim. And if Washington tightens the tap on how much money they’re giving to Alaska for whatever reason, that could m- make it difficult.

Apparently they get a lot of federal funding and, hey, you know what, uh, the Trump administration’s like, it’s, uh, fly by the seat of your pants what’s happening one day to the next, so nobody knows. But they’re all things that require future predictions and as I said in the last [00:34:00] show, Philip Tetlock pointed out in his book on forecasting, even experts don’t know what’s gonna happen in the future, so I’m not gonna try and predict.

Tony Kynaston: Yeah You wonder if

Cameron: We’ll just look at the numbers as they are today

Tony Kynaston: should it be especially experts don’t know what’s gonna happen in the future

Cameron: Yeah. Monkeys throwing darts at a dartboard.

Tony Kynaston: Yeah

Cameron: So a couple of notes on the management before I go. The founding era chairman, Joe Shearhorn, retired at the end of last year after 35 years. The CEO and the CFO continued on, though. CEO is a guy called Mike Houston. CFO is a guy called Jed Ballard. They have been buying shares in the company in the last few months, which is good to see, but they’re not huge amounts.

We’re talking tens of thousands of dollars. Neither of them nor Shearhorn holds, holds a major stake in the company. I think they’re all way less than 1% of the company, which is interesting. For a company this young, I expected it to have sort [00:35:00] of big founder shareholders, but, um, I couldn’t find anything So that’s it.

Um, who’s Michelle Shocked, Tony?

Tony Kynaston: Well she’s the singer who sang But you know you’re in the largest state in the union when you’re anchored down in Anchorage Anchored down in

Cameron: Thought she was telling me she was a senior executive or a major shareholder in the bank or something there. And I’m like, “Oh, I missed her name.”

Tony Kynaston: all her money in there

Cameron: I’ve never heard of Ms. Shocked.

Tony Kynaston: You haven’t Oh okay

Cameron: No. Uh, so that’s it, basically. I’ve got the scorecard to go through, but I don’t, I, I couldn’t find anything really exciting or interesting.

They’re just a boring, boring bank in Alaska that’s coming up quite cheap for some reason on our buy list. Probably because they’re a boring, boring bank in Alaska

Tony Kynaston: couple of things I noticed when I had a look at it Um uh y I wondered whether it was a monopoly but it’s not But it does certainly have a um lot of a lot of k monopoly-like [00:36:00] characteristics because uh the Alaskans do like to bank with a local company a local bank funnily enough Wells Fargo did have the biggest share in Alaska so people are also interested in getting the best price I guess too they also face competition This bank faces competition from credit unions so it’s like that kind of local flavor to people uh in the North They wanna bank with with locally owned businesses Um yeah but uh a as as my analysis said like yours the factoring business was the surprising one for me that had grown so quickly and also the business banking side of things I think is their their sort of secret sauce that they can the local businesses with um local knowledge to back it up And that that allows them to be better at writing loans to oil drillers or fishing companies and that kind of thing cause they know the industry much more intimately than someone who hasn’t grown up in Alaska [00:37:00] and and worked with it all their lives Two key advantages

Cameron: Well, um, just to get into the numbers,

Tony Kynaston: wow it’s just started raining really hard here Can you hear that

Cameron: I can hear it. Yeah

Tony Kynaston: Coming down now

Cameron: These guys have, uh, a quality rank on Stockopedia of 75, so I scored them for that. Their stock rank is 92, so I scored them for that. Their, uh, F score is a seven out of nine, so they got a score for that. Their price is above our IV number one, but below our IV number two. The price is not less than book or less than book plus 30, so I couldn’t score them for those.

Book value growth is positive. They do not have a new three-point upturn. Their PE is not less than the yield. The yield is not greater than the bank [00:38:00] debt. The yield is 2.59%, by the way. Um, their forecast IV is not greater than twice the price, but they do have positive sentiment, of course, or they wouldn’t be on the list.

Well, they’re slightly below the, um, uh, Josephine cutoff today, but they’re doing okay apart from that. So they ended up with a QAV quality score of 75%, which makes them sort of in the sweet spot for us, and a QAV score of 0.20. Price to operating cash flow, I forgot to mention, was 3.66, so that’s the key one, so quite a low Pr/OpCaf for us.

And, um, again, I couldn’t really, you know, couldn’t really figure out why the market was shying away from them. There was nothing, no scandals, no sort of. Nothing that untoward that I could see, so I don’t [00:39:00] know. It’s just a deal, I think, Tony. Got any more thoughts?

Tony Kynaston: or you can put your money in SpaceX instead of putting it into a profitable bank

Cameron: Sure

Tony Kynaston: a monopoly-like characteristic about it in a big state Yeah Or you can watch it burn

Cameron: And if, and if you look at

Elon’s never going to Mars. The Mars thing is a pipe dream as far as I can tell. Uh, if you look at their chart though, like the share price has been going up pretty consistently since middle of 2023. Uh, so it’s, it’s been on a tear for nearly three years now, um, from like about $9.50, I think, in 2023, up to 24 bucks.

Cameron: So the market tends to agree with us, tends to think that it’s been a good investment for the last couple of years. Good luck to anyone who got in it back in middle of 2023. But still coming up as a good quality buy for us, [00:40:00] despite the fact that there’s already a lot of, uh, been a lot of growth in the share price.

So we’ll see how it goes, Tony. I have added it to our light portfolio, and we’ll keep an eye on it

Tony Kynaston: Good Well I’ve just queued up Michelle Shocked sing Anchorage which I’ll listen to after this

Cameron: Right. I’m gonna–

Tony Kynaston: You

Cameron: I’ll listen to that on my way to kung fu

Tony Kynaston: this

Cameron: with Fox this afternoon

Tony Kynaston: I said Captain I said What It’s Ruddy believe you haven’t heard it

Cameron: Look at you bringing, bringing back all the classics. It’s a shame we can’t play music on the show like I used to on my old podcast. That’d be fun. We could have a singalong. All right. Well, um, thank you Tony. Have a good week. Glad to have you back, and, uh, happy hunting everyone

Tony Kynaston: Okay I’m good to see you again Talk to you next week

Here’s the performance of the “pulled porks” (eg deep dives) we’ve done on the show in the past.