Investors may need to put this one on their watch list.

Live Oak ‘s ( LOB -0.55%) stock has been down recently more than 60% off its high, however, in this video clip from “The Rank” on Motley Fool Live , recorded on July 27 , contributors Matt Frankel and Jason Hall make the case that it could be a prime opportunity to invest in the best-in-class small business lender.

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Audio TrackFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteTransparencyOpaqueBackgroundColorBlackTransparencyOpaqueWindowColorBlackTransparencyTransparentFont Size100%Text Edge StyleNoneFont FamilyProportional Sans-SerifReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button. Should you invest $1,000 in Live Oak Bancshares, Inc. right now? Before you consider Live Oak Bancshares, Inc., you’ll want to hear this.Our award-winning analyst team just revealed what they believe are the 10 best stocks for investors to buy right now… and Live Oak Bancshares, Inc. wasn’t one of them.The online investing service they’ve run for two decades, Motley Fool Stock Advisor , has beaten the stock market by 3X.* And right now, they think there are 10 stocks that are better buys. *Stock Advisor returns as of July 27, 2022 Matt Frankel: I was shocked at how much this one has been beaten down lately. Jason Hall: Yeah [laughs]. Frankel: Down 64, it’s priced like half of its loans are going to default. Not half, but it’s priced like it’s going to see a ton of defaults, which is odd being that almost half of its loans are government guaranteed. Forty-five percent of its loan origination is Small Business Administration or SBA-backed loans.They do a great job of underwriting. They’ve done a great job of keeping their default rate low even compared to peers over time because they loan to industries that they know very well and nothing else. Great returns on equity, great capital structure. It’s a bank that doesn’t have branches, so that’s an inherent cost structure.It does a really good job of growing. It’s grown its loan production at a 21% annualized rate for five years in a row, including in the first quarter of this year. We’re going to see that slowdown, loan volume is going to slow down in 2022. I’m not saying it’s immune to the recession fears and higher interest rates and things like that, but interest rates could end up being a net positive for Live Oak.It pays a lot less on its deposit base than it charges in loans, so the spread should rise as interest rates rise. If it can keep defaults in check, this stock is an absolute bargain right now. So I may have given away some of the reasons you just bought it, but what can you say about it? Hall: So I’m going to build off what you said. I think all of those things are very, very true, but I think it’s also, it’s best-in-class. I really want to hit on that because you think about a lot of the big banks, they’re the big banks because they do a lot of mortgage lending. That’s just a huge market. It’s a great way to build a good loan [business]. The economics of that industry makes sense. They learn it, they build a business there, and then they scale that up. They’re just really good at that and they’re disciplined at doing it.At 10 times earnings and you say, well, what if earnings fall OK, still it’s 10 is pretty cheap if we go through a weak period, you hold it long enough and it works out. Just over two times book value for a branchless bank that’s best-in-class, it’s less than $9 billion dollars in total assets. This is one that I took a very tiny position that I had.Another one of those rising stars stocks that I bought years ago and I haven’t really added to and say, this is a perfect opportunity that for I think a best-in-class misunderstood bank to buy and I think the misunderstood part is to me the biggest reason why it’s valued the way it is. Frankel: I mean, a lot of the results you’re […]

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