Standard Chartered PLC(LSE: STAN) is not everyones cup of tea. The banks shares have fallen 32% over the past twelve months as concerns about the groups capital position and falling profitability have weighed on sentiment. Many analysts,including myselfare also concerned about Standards exposure to the commodities sector.
However, one of the worlds oldest, and most respected,funds hasbeen building a position in the bank, as the funds managers believe that Standard is undervalued.
Tweedy, Browne Partners has been in business for over 90 years and currently manages around $21.4bn for investors. The same group of fund managers and directors has run the group since its inception. No managing director or former general partner has ever left Tweedy, Browne to join another investment firm, and there have only ever been eleven principals, four of whom are currently active.
Using a value-orientated approach, the funds managers have been able to outperform the market by a high double-digit percentage for decades and the group started buying Standard during the first quarter of 2014. Since then, the fund manager has continued to add to its Standard position and it is now the funds largest position.
Plenty to like
So what doesTweedy, Browne Partners like about Standard?
Well, firstly the funds analysts love the banks low valuation. At present the bank is trading at a forward P/E of 7.9 for 2015, falling to 7.3 for 2016, making it one of the cheapest banks in the banking sector. Tweedys analysts also like Standards dividend yield the banks shares currently support a yield of 6.3%.
Its not just Standards valuation thats getting Tweedy fired up. The fund also likes the state of Standards loan book and mortgage portfolio. The bulk of Standards operating income is derived from wholesale activities such as corporate finance and trade finance.
Additionally, Standard has a sizeable mortgage portfolio that is well secured by a loan-to-value ratio on its mortgages of less than 50%. Most of the banks loans are made on a long-term basis so the group is not dependant on volatile, short term financing.
On top of all this, Tweedy is excited about Standards exposure to thefastest growing parts of the world, where middle classes are on the rise.
We dont all hold the same opinions
Tweedy, Browne Partners has a long record of successfully picking stocks, but we dont all hold the same opinions and, for some, Standard might not be a suitable investment.
Indeed, the banks exposure to the commodity market is concerning anddata suggests that Standard might be forced to ask shareholders for more cash, in order to bolster its capital position and financial cushion.
ButTweedy, Browne believes that Standard has a bright future and the bank could be a great pick for your portfolio. To help you assess the bank, and conduct your own analysis, our top analysts have put togetherthis new report.
The report guidesyou through the seven key steps all successful investors follow before making an investment. It is designed to help you assess your own risk profile and look for investments.
But don’t delay, this report is only available for a limited time. Soclick hereto download the free report today.
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