Miller, Tabak & Co.'s Financial Research focuses on the critical variables affecting stock price performance and business model dynamics for the banking, REIT, and property/casualty insurance underwriting and insurance brokerage sectors. Balance sheet analysis - including stock-price and net-asset-value sensitivities to changes in credit spreads and in long-term interest rates and inflation, as well as individual-company credit and liability exposures - comprises a major part of our Financial Research effort. We also closely examine each sub-sector's and each individual company's business-model operating profit margin sensitivities, especially to changes in economic and monetary conditions, as well as to competitive efforts to develop successful and timely business strategies.
In general, we match current and expected business conditions with the strategic thrust and inherent limitations of each company's operating franchise, and then we develop an opinion as to whether the sub-sector and the company will encounter significant tailwinds or headwinds - and at what level of strength - over the next 12-18 months.
Many of the business models we closely follow are highly-leveraged relative to the standard industrial company model, and most of these business models also entail a high proportion of "commodity" products in their business mix. We believe that, in a commoditized marketplace, successful capital management and a low tolerance for unnecessary risk-taking are key ingredients in building and maintaining business franchises that endure, and prosper, despite wide cyclical swings that can be exaggerated - for individual companies - by the use of substantial amounts of financial leverage.
While we can and do comment regularly on trends affecting all banks, REITs, and property/casualty underwriters and insurance brokers, our current closely-followed coverage list is made up of 19 stocks: in banking, BBT, City National, Fifth Third, First Midwest, FirstMerit, Huntington Bancshares, HSBC, Regions Financial, Wells Fargo, and Zions Bancorp; in REITs, Apartment Investment & Management, Duke Realty, Equity Residential, Home Properties, Prologis, and United Dominion; in the property/casualty insurance sector, ACE, MMC, and Willis Group. Our list is somewhat eclectic, and includes both small- and large-cap names. We can, and often do, provide analyses of other companies upon request.
For banks, we publish detailed quarterly credit analysis tables and periodic estimates of franchise net asset values, as well as analyses of operating margin dynamics; for REITs, we publish weekly charts comparing REIT price/FFO multiples with (inverted) credit spreads on junk bonds, and also periodic updates of net asset values as well as detailed quarterly margin reviews; for the property/casualty insurance rate-sensitive group, we periodically report on, and analyze in depth, the factors that could lead to an increase or decrease in rates, as well as detailed quarterly operating margin analyses.
Tom Mitchell has worked covering all sub-sectors of financial stocks for 37 years, both as a "sell-side" analyst and as a "buy-side" analyst and portfolio manager. His primary focus is to seek to make good investment decisions by getting the "big picture" right. Recognizing the high value of clients' time, he also attempts to write compressed reports, inviting clients who wish to go into detail to contact him for more in-depth discussions.