BOFI is overvalued
Disclosure: We are short shares of BOFI.
BOFI trades at 3.5x book despite unsustainable return on equity, increasing competition, and unusually severe exposure to interest-rate risk.
They profited from distressed mortgage-backed securities and a steep yield curve, but as the curve flattens and old bonds mature, their returns will come back down to earth.
Their valuation is at a big premium compared to its peers, already pricing in high returns and rapid growth. But in the past few quarters, their organic account growth has been negative.
BOFI trades at 3.5x book despite unsustainable return on equity, increasing competition, and unusually severe exposure to interest-rate risk.
They profited from distressed mortgage-backed securities and a steep yield curve, but as the curve flattens and old bonds mature, their returns will come back down to earth.
Their valuation is at a big premium compared to its peers, already pricing in high returns and rapid growth. But in the past few quarters, their organic account growth has been negative.
Kerrisdale Capital - can you give more details about your position? When did you short, what price etc?
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