Latest news with #SiliconValleyBank
Economic Times
8 hours ago
- Business
- Economic Times
Sorbh Gupta explains why it's a good time to look at smallcap stocks
Tired of too many ads? Remove Ads Edited excerpts from a chat: The market seems to be inching towards new record highs, but are we pricing in too much hope and too little risk? Where do you think we are in the cycle? You've launched a smallcap fund NFO when many smallcaps are still licking their wounds from the brutal correction that began last year. What makes you positive at this stage on smallcaps? Tired of too many ads? Remove Ads How do you separate turnaround stories from value traps? Especially in a space where promoter pledges and poor governance often go unnoticed until it's too late? Everyone talks of forensic filters and governance frameworks. What's your team's actual red flag checklist when it comes to smallcaps? Tired of too many ads? Remove Ads Which sectors or themes within small caps are looking mispriced to you right now and what's your favourite contrarian bet? What is going to be the diversification strategy in the Smallcap Fund? How many stocks would you want to own in a typical market phase without over-diversifying but spreading risk across counters? Despite the recent rally in smallcaps , a deeper dive reveals a tale of two markets. While headline numbers suggest exuberance, Sorbh Gupta , Head-Equity at Bajaj Finserv AMC , points to a more nuanced reality: nearly two-thirds of small-cap stocks remain significantly beaten down from their this conversation, Gupta explains why this divergence creates a fertile ground for active stock pickers, how his team's forensic approach weeds out value traps, and which emerging sectors offer the most compelling opportunities in today's small-cap markets are approaching record highs, earnings are also moving higher. We believe there is a cyclical recovery, which should push corporate earnings growth higher. During the initial phase of the upcycle, some stocks may appear expensive. However, as growth catches up, these stocks become attractive. We believe that at this stage, the market is neither completely cheap nor expensive. Following the correction between September and March, several pockets of valuation comfort have emerged. Within these, one can find quality businesses with reasonable valuations and strong growth outlooks for building a decent equity universe for small caps includes companies with a market cap above Rs 2,000 crore, giving us an extended universe of around 900 stocks. As of May 31, out of those 900, nearly 600 companies were down more than 25% from their 52-week highs. So, while there are concerns that small-cap levels are elevated, there's a long tail within the category that hasn't you look at the Nifty Small Cap 250 index and track the bull market that began around the Silicon Valley Bank crisis, the index has doubled since then. This index spans 52 industries, of which only 17 have outperformed the index, while 35 have underperformed and have recorded lower returns in comparison to the index. It's a fairly level market and a heterogeneous one at that. It's a good environment for active stock selection. This is the near-term reason why I believe this is a good time to look at small caps and curate a decent active does 'value' mean in your smallcap universe? Low PE stocks that come within the parameters of quality and growth appear to be value, in our small-cap universe, we refer to companies trading below their intrinsic value. These are often businesses where the long-term growth outlook remains intact, but near-term mispricing creates an opportunity. In some cases, even quality companies with strong growth potential may appear optically expensive on a price-to-earnings basis. However, the market may be underestimating their ability to scale, expand market share or deliver higher return on for us, any stock trading below its intrinsic value qualifies as a value opportunity; however, only after passing through our filters of quality and small caps space, we believe the most important part is eliminating rather than selecting. Our holistic approach towards careful stock selection helps us filter out the best of the best. So, we eliminate at the first level. The first level of quality comes as forensic research, where we'll eliminate bad management, with a bad track record on related party transactions and those that have litigation we come to the quality, growth, and value triangle. That is, the quality of the business, the industry growth it offers, and the valuation it is available at. Among these, the most sacrosanct is quality. Once we test for quality in terms of governance and fundamentals, then we look at the business's ability to gain market share and maintain profitability, growth, return ratios, and capital efficiency. Lastly, we assess value versus growth, looking at the have built an internal forensic team. Out of the 900 stocks we see from the small-cap broader universe, there is a strong list of eliminations that we'll do based on the forensic analysis that we perform. As part of this, we will conduct extensive data-based checks, examine related party transactions, go through auditors and auditor reports, assess who the bankers are, and review other regulatory filings of the company. This allows us to filter out companies where we don't want to we begin with this first level of negative screening, and then move to the positive, where we look at quality, value, and growth. There we will take a look at the quality of the business, the growth that it offers and the industry growth along with the valuations it is available are seeing opportunities emerging in small caps that are unique to the segment. Over the last three to five years, new industries have emerged due to government reforms, technology, and structural changes. These naturally lack large-cap representation since the sectors themselves are still these, the defence looks like a great opportunity, though we have to be careful and selective because valuations have gone through the roof in some cases. Similarly, opportunities in power equipment are opening up, with the government planning significant investments over the next five to seven years. which opens up a space. The online marketplace space is gaining momentum. That opportunity was never there seven or eight years ago. Also, electric vehicles, a space that did not have investable opportunities earlier, now represent a growing I mentioned, any company with a market cap of more than ₹2,000 crore is part of our broad universe, which includes close to 900 small caps. From there, we filter. We are looking at anywhere between 40 to 100 stocks. The plan is to be quite well general view in the market is that the Q4 earnings season was relatively better for midcaps rather than smallcaps. What is the kind of earnings growth that you are expecting from small caps in general in FY26?So far in FY26, we've seen easing monetary policy, rate cuts, higher liquidity, and earlier tax reductions. All of these developments support a cyclical recovery in the Indian economy. This should begin reflecting in corporate earnings going medium-term equity outlook appears positive, particularly for the broader caution is advised in export-oriented sectors due to U.S. economic uncertainty and potential tariff impacts. Geopolitical risks may also cause intermittent the economy picks up, smaller businesses and broader market participants tend to benefit. The small-cap space, especially after the recent correction, looks promising with bottom-up opportunities. Investors may consider quality small-cap funds to tap into long-term growth.
International Business Times
2 days ago
- Business
- International Business Times
After SVB's Collapse, Tech Leaders Apply to Launch New Digital Lender for AI and Crypto
In a major move that combines fintech invention with venture-funded aspiration, a group of tech billionaire backers are launching a new U.S. digital bank called Erebor, squarely targeted at the startup world left adrift following the rise and fall of Silicon Valley Bank (SVB). American defense technology company Anduril's co-founder Palmer Luckey is leading the effort with support from Founders Fund, which is connected to tech investor Peter Thiel, as well as Joe Lonsdale, the co-founder of Palantir, who is a prominent political donor. Their aim is to build a secure, innovation-oriented banking technology infrastructure that would support high-risk industries like crypto, artificial intelligence, defense, and new manufacturing fields. The company wrote in its application for a national bank charter that Erebor would exist as a fully digital bank with its home base in Columbus, Ohio, and a second office in New York. The bank will serve not just tech businesses but individuals who work or invest in those sectors—addressing the financial vacuum that SVB's abrupt cash crunch left in March 2023. Erebor is led by co-CEOs Owen Rapaport and Jacob Hirshman, who was an advisor to stablecoin issuer Circle. Their vision encompasses a regulated system that would make Erebor the most compliant institution when it comes to stablecoin transactions. The bank will even keep stablecoins on its balance sheet, an unusual step in traditional banking. Stablecoins, which are tied to traditional currencies such as the U.S. dollar, are gaining traction among banks and fintech outfits for facilitating faster cross-border payments, streamlining settlements, and providing more access to digital finance. SVB had at one time been the financial backbone of the earliest-stage startups, but quickly, it and the venture capitalists with whom it worked found themselves scrambling after the bank collapsed. With the arrival of Erebor comes a new financial support system for tech-driven firms that traditional banks still consider too risky. Although Luckey and Lonsdale won't be running Erebor day-to-day, their backing shows serious intentions to change around banking for the tech economy. With a commitment to secure digital finance, regulated crypto operations, and AI-driven innovation, Erebor could be a blueprint for the next generation of tech-first banking.
Gizmodo
3 days ago
- Business
- Gizmodo
Peter Thiel and His Goons Are Launching Their Own Bank (Yes, It has a Tolkien-Inspired Name)
Silicon Valley Bank's collapse in 2023 left a hole in the tech industry. For years, the bank poured money into the Bay Area's riskier startups, allowing those companies to pursue their various 'disruptive' aims. Eventually, mismanagement led that business model to collapse. Now, billionaire Palantir founder Peter Thiel and several of his pals want to fill the void left by SVB by launching their own bank dedicated to backing the industry's riskier bets. Multiple outlets have reported that the new bank will be called Erebor, named so after the 'Lonely Mountain' from J.R.R. Tolkien's The Hobbit. If you'll recall, the Lonely Mountain is where Smaug, the great and terrible dragon, lives. Basic literary analysis tells us that Smaug (like most dragons) is a symbolic embodiment of avarice and greed. Anyway, Erebor—like SVB before it—will funnel money to the tech industry's startup economy, the Financial Times reports. A filing associated with the bank states that it will 'differentiate itself' by assisting businesses that 'are not well served by traditional or disruptive financial institutions, in particular with respect to insufficient access to credit.' That will reportedly include cryptocurrency companies. Though it will likely serve many California companies, the bank itself will be based in Columbus, Ohio, FT writes. Thiel is just one backer. The leader of the pack is reported to be Palmer Luckey, the founder of Anduril (another company that stole its name from the Tolkien mythos), and VR firm Oculus (which Facebook bought in 2014). Other backers include Joe Lonsdale, the co-founder of Palantir and Founder's Fund, which is Thiel's venture capital firm. One clear takeaway is that this is yet another substantial power play by Thiel, Luckey, and the gang of well-heeled luminaries that increasingly seem to dominate the tech industry. Their position as a financial conduit into the next generation of startups could give them influence over companies that, in ten years time, may turn into the next Facebook or Google. That said, there is also the opportunity for this venture to—like SVB—be hugely mismanaged and collapse in a heap of withdrawn deposits. The real takeaway is that Thiel desperately needs to stop besmirching Tolkien's legacy by naming all of his nefarious projects after stuff from The Lord of the Rings. Seriously, how much can one dead author take? At this point, it's almost like Thiel and his cronies are making fun of Tolkien. What's next? A drone company named after the Nazgûl? Honestly, I wouldn't put it past them.
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First Post
3 days ago
- Business
- First Post
Tech's new ‘Lonely Mountain': Billionaires join hands to guard start-up treasures in Silicon Valley
A group of tech entrepreneurs is preparing to launch a US bank aimed at serving start-ups and cryptocurrency businesses, seeking to fill the void left by the collapse of Silicon Valley Bank (SVB) read more A group of tech entrepreneurs led by Palmer Luckey, co-founder of military contractor Anduril, is preparing to launch a US bank aimed at serving start-ups and cryptocurrency businesses, filling a void left by the collapse of Silicon Valley Bank (SVB). The new institution, to be named Erebor, has applied for a national bank charter, according to a regulatory filing made public this week. Erebor is backed by a roster of prominent technology investors, including Joe Lonsdale, founder of venture capital firm 8VC and a co-founder of defence company Palantir. Founders Fund, the venture capital group launched by Peter Thiel, is also among the investors, Financial Times cited two people familiar with the matter as saying. STORY CONTINUES BELOW THIS AD The bank is named after the 'lonely mountain" from J.R.R. Tolkien's The Lord of the Rings, the same literary source that inspired the names of Anduril and Palantir. According to the application, 'the bank will be a national bank . . . providing traditional banking products, as well as virtual currency-related products and services, for businesses and individuals.' Erebor intends to target companies in what it describes as the 'innovation economy,' with a focus on virtual currencies, artificial intelligence, defence, and manufacturing. The filing said the bank would also serve individuals who work for or invest in these companies, and would work with non-US firms 'seeking access to the US banking system.' The bank's founders began discussing the idea in 2023 after the collapse of SVB, which had been the preferred lender for many US start-ups. SVB's assets were eventually acquired by First Citizens Bank, and a number of its bankers joined HSBC in the US However, many start-ups have since reported difficulty accessing capital and services, prompting efforts to create a new financial institution tailored to their needs. Erebor plans to set itself apart by focusing on customers that are 'not well served by traditional or disruptive financial institutions, in particular with respect to insufficient access to credit,' the filing said. The bank will be headquartered in Columbus, Ohio, with an additional office in New York. It plans to operate entirely digitally, marketing its products and services through a smartphone app and website. STORY CONTINUES BELOW THIS AD The venture is expected to play a significant role in handling stablecoin transactions, a type of cryptocurrency pegged to real-world assets like the US dollar. The application notes Erebor aims to be 'the most regulated entity conducting and facilitating stablecoin transactions.' Luckey and Lonsdale, both major donors to Donald Trump during the 2024 presidential election, are not expected to be involved in Erebor's daily operations, according to people familiar with the project. The bank will be led by co-CEOs Jacob Hirshman, a former adviser at crypto firm Circle, and Owen Rapaport, CEO of digital assets compliance company Aer Compliance. Mike Hagedorn, a former senior executive at Valley National Bank, will serve as president. Some details of the application, including its equity structure, business plan, and shareholder information, were submitted confidentially and have not been made public. Lonsdale confirmed he was financially backing the project but declined further comment. Luckey did not respond to a request for comment. STORY CONTINUES BELOW THIS AD
Mint
18-06-2025
- Business
- Mint
Devina Mehra: Why investing in a bank often takes nerves of steel
To those who ask me why my takiya kalam is 'I am a nervous investor in banks and lenders," here's the answer. My refrain has nothing to do with poor quality bank management or anything of that kind. It's just that the structure of banking differs inherently from that of most other businesses. One, it is in the nature of this business for negative surprises to outnumber positive surprises. The most recent being losses in the currency derivatives of a private sector bank that came to light a couple of months ago, with the result that its share price has halved from its highs even as the Nifty bank index has been doing very well. Also Read: Devina Mehra: Diversified or concentrated portfolio? It's an easy choice Even on the lending side, when bank borrowers do very well, unlike equity investors, lenders do not get any extra income. However, when something goes wrong with a borrower, its lender has to take a hit. So, where can the positive surprises come from? Credit growth? Unfortunately, higher-than-expected growth may not be a good thing at all for banks because problems in a lending book show up only some years later. The financial crisis of 2008-09, for instance, was triggered by a hit on the home mortgage business of US banks where reckless lending resulted in way higher-than-expected defaults. On the other hand, if a bank management remains conservative through a credit boom, it gets penalized for not growing as fast as the competition. As the then CEO of Citigroup Chuck Prince said in the context of the 2008 crisis: 'When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance." Two, while many banking crises start with too much poor lending, this is not always the case. Silicon Valley Bank (SVB), which was tottering at the edge of collapse in early 2024 till it was bailed out by the US Fed, had actually lent out too little. Assets on a bank's balance sheet are not just credit or loans. They also include investments like bonds. In SVB's case, it had channelled most of its deposits into such investments. Also Read: Devina Mehra: Investors must see through gold's glitter as a risk-free investment There was also a considerable asset-liability mismatch (ALM). What this complicated-sounding term means is that while the bank had deposits that were short-term in nature, its assets were long-duration securities. All banks do this to an extent, but in the case of SVB, it was pronounced. The result: it suddenly had losses when interest rates went up and that too in illiquid assets. Three, why do problems on the asset side, whether in lending or investing, go out of hand for banks? This is because a bank is inherently a leveraged institution—it has a balance sheet typically 8 to 10 times that of its equity capital. Simplifying a bit, for every ₹10 of equity put in or retained by equity holders, the bank lends out or buys investments of ₹80-100. Even if ₹5 of the bank's lending goes bad, this is 40-50% of its capital. For similar reasons, a leveraged trading or investment bet can deal a fatal blow to a bank's balance sheet. After all, a single trader took down the 200-plus year-old Barings Bank in 1995. As an outside investor, you never know where problems are hiding in either the credit or trading book of a bank. There is no way to take a really informed bet when investing in a bank. It is mostly a blind wager that the management is doing what it is supposed to. The really interesting part? Banking is the ultimate confidence game. Also Read: Devina Mehra: Forgetting history can be costly, especially so while investing I remember my mother explaining a bank run to me when I was in school (for context, she's a postgraduate in economics): while a bank promises to give you the money you have deposited on demand, in reality no bank can pay back its depositors all at once. The money given by depositors is tied up elsewhere and is not really available with the bank to be returned on the spot. Even the most solid bank in the world will collapse if all or most of its depositors line up at its door asking for their money back. That is why banking regulators move so swiftly anytime there is even a hint of a loss of confidence in a bank. And, as we have seen multiple times in India, when there are rumours of a bank being in trouble, a shotgun marriage in the form of merger is often arranged with a stronger bank. This protects the weak bank's depositors but usually not its shareholders. Further, lessons from history in finance are easily forgotten and institutional memory is notoriously short. As a friend who was working for a major international bank that largely side-stepped the global financial crisis of 2008-09 told me, mostly what saved the bank was the memory of one of the senior management team members who vividly recalled the Asian crisis of a decade ago, when he was barricaded all night in the bank's branch in an Asian capital while people screamed for the heads of bankers outside. That reminded him—and hence the bank—of how bad things could get. Else, risk blindness and failure of imagination are the biggest issues in banking risk management. Ironically, I am writing this at a time when I am probably the most positive I have been—at least in the last three years—on Indian banking stocks as an investment. But this piece is about the framework of banking as a business. Disclosure: I was a banker once upon a time. The author is founder of First Global and author of 'Money, Myths and Mantras: The Ultimate Investment Guide'. Her X handle is @devinamehra
