NLY - Famed bond investor Bill Gross buys regional bank stocks after sector selloff

2023-04-21 14:27:37 ET

Bill Gross, who made his name as a bond investor, is adding regional bank stocks to his portfolio after the sector slumped with the failure of three banks in early March.

The stocks that he's buying were among the hardest hit in the aftermath of the Silicon Valley Bank, Silvergate Bank, and Signature Bank failures. His picks are Western Alliance Bancorporation ( NYSE: WAL ), Synovus Financial ( NYSE: SNV ), PacWest Bancorp ( NASDAQ: PACW ), and SPDR S&P Regional Banking ETF ( NYSEARCA: KRE ).

"Well I've always told myself and close friends that I wish I could start a bank," he said in a letter posted to his website on Friday. "It's a license to make money even when run conservatively."

However, it's some banks that were run not-so-conservatively like Silicon Valley Bank that made headlines last month. That "produced a moderate financial crisis cratering the market prices of regional banks deemed susceptible to withdrawals of deposits," he said.

With that, many regional bank stock have tumbled 30%-40%, making it "possible to own (or in effect) start a bank at 60%-70% of book value."

While regional banks will have cyclical problems when a recession hits, "my long-time wish to own a bank is now possible via public markets," he said . "Recent ROEs of 9%-10% at 60% of book provide an enticing long-term investment."

In Friday afternoon trading, Western Alliance ( WAL ) stock climbed 3.0% , PacWest ( PACW ) gained 0.6% , Synovus ( SNV ) slipped 0.7% , and KRE dropped 1.2% .

In December 2022, Gross was predicting "potential chaos in financial markets" if the Federal Reserve kept raising rates. At the time, he said he was investing in Annaly Capital Management ( NLY ) and AGNC Investment ( AGNC ) as they benefit when spreads between 30-year mortgages and 10-year Treasurys narrow.

More on the Bank Crisis and Western Alliance:

• Western Alliance: Major Recovery Ahead
• Western Alliance, other hard-hit lenders added to Wedbush Best Ideas List
• Q1 Earnings: Stock Roars Higher on Surge of Clarity
• Banks Are On Sale But Risks Remain

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