Sean Stannard-Stockton of Ensemble Capital Management presented his in-depth investment thesis on First Republic Bank (NYSE: FRC) at Best Ideas 2018.
First Republic Bank is one of the best-run banks in the U.S. Importantly, rather than engaging in the commodity business of buying and selling money, First Republic is actually a retail franchise offering superior customer service to high net worth individuals. This unique approach has led to the company growing rapidly since its founding in the 1980s with a long growth path ahead. With net promoter scores on par with Apple and Amazon versus competitors who score lower on customer satisfaction than cable companies, telecoms, and airlines, First Republic has a deep competitive advantage that elevates the business out of the commodity banking industry into a class by itself. At 17x 2018 consensus earnings, the stock screens expensive for a bank. But with 20% revenue growth and margin leverage as the company works through investments it is making in the business and interest rates normalize, the stock offers compelling long-term upside of 13-16% per year over the next three to five years.
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About the instructor:
Sean Stannard-Stockton, CFA is the president and chief investment officer of Ensemble Capital Management, and portfolio manager of the Ensemble Fund. In addition to advising the Ensemble Fund, Ensemble Capital manages approximately $675 million in separate accounts on behalf of families and charitable institutions. Prior to working at Ensemble Capital, Sean worked at Scudder Investments. He holds a BA in Economics from the University of California, Davis and the Chartered Financial Analyst designation.