Kaushal Majmudar and Sam Namiri of Ridgewood Investments presented their in-depth investment thesis on BofI Holding (Nasdaq: BOFI) at Wide-Moat Investing Summit 2018.

Thesis summary:

BofI Holding, based in San Diego, is a branchless pure-play internet bank that began operations as a private company in 2000. In the last eighteen years, BOFI has built a fast-growing nationwide banking platform that should continue to generate high returns on equity and assets for some time to come. BOFI’s low-cost business model is differentiated and underappreciated and not correctly valued by the market, partially due to periodic short attacks that are based on a misguided understanding of their business model or even misrepresentations.

The management team has done a great job with capital allocation, growing the bank profitably by developing new products, adding distribution channels, and via acquisitions. The bank completed its IPO in March 2005 at a split-adjusted price of $2.88 per share and recently traded at $43 per share. A price-based CAGR of ~23% annualized over the thirteen years since its IPO, over the same period of time the bank compounded BV per share at an annualized rate of ~17% per year and EPS by ~20% per year. BOFI is a compounding machine that can continue to grow EPS and BV per share at above-market rates for many years.

Trading at a forward P/E of 18x, the quality and consistency of BOFI’s differentiated model, low-cost position, quality of execution, and growth prospects offer patient investors an attractive opportunity to compound capital.

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About the instructors:

Kaushal “Ken” Majmudar, CFA founded Ridgewood Investments in 2002 and serves as its Chief Investment Officer focusing on managing long-term Value Investing based strategies. Ken’s high level experience and work with clients has been recognized and cited on multiple occasions. He is a noted value investor who has written and spoken extensively on the subject of value investing and intelligent investing. Prior to founding Ridgewood Investments in late 2002, Ken worked for seven years on Wall Street as an investment banker at Merrill Lynch and Lehman Brothers where he has extensive experience working on initial public offerings, mergers and acquisitions transactions and other corporate finance advisory work for Fortune 1000 companies. He has been a member of the Value Investors Club – an online members-only group for skilled value investors founded by Joel Greenblatt – where he posted a buy recommendation on Nvidia in 2002 – possibly one of the best long-term investment ideas ever posted on VIC. He has also been a member of SumZero – an online community for professional investors, and written for SeekingAlpha – among others. Ken graduated with honors from the Harvard Law School in 1994 after being an honors graduate of Columbia University in 1991 with a bachelor’s degree in Computer Science. He is admitted to the Bar in NY and NJ, though retired from the practice of law, as well as a member of the CFA Institute and EO (Entrepreneurs Organization).

Sam Namiri recently joined Ridgewood to help build its Small and Microcap investments and will be co-managing the Ridgewood Select Value Fund with Ken. Prior to Ridgewood, Sam spent five years as an associate at Grand Slam Asset Management, a small cap value based Hedge Fund. Sam graduated with a bachelor’s in Industrial Engineering and Operations Research from UC Berkeley in 2005 and an MBA from Columbia Business School in 2012.