In short: Link's conviction bank and her final trade: at 7.5× earnings, down ~17% on the year, with ~$2.6B of Discover-deal synergies "totally not appreciated in the stock price" — "really too cheap." Also upgraded to buy at HSBC today ("underperformance looks overdone").
Capital One is a consumer-lending bank that recently absorbed Discover. Stephanie Link's highest-conviction bank pick (and her final trade): it trades at just 7.5 times earnings, is down about 17% on the year, and — her key point — the market isn't giving it credit for roughly $2.6 billion in cost savings ("synergies") coming from the Discover deal. "Really too cheap." Analysts at HSBC upgraded it to buy today, saying the underperformance looks overdone.
In short: "The biggest subprime lender," ~25% off — his exhibit for the wounded, K-shaped-economy financials (auto defaults, credit-card delinquencies) hiding behind the record bank indices; a warning sign, not a buy.
Capital One is "the biggest subprime lender," down about 25%. He uses it as the warning light for the "K-shaped" economy: behind the record-high bank indices, the wounded financials exposed to auto-loan defaults and credit-card delinquencies are telling you ordinary households are in trouble. It's evidence for his stagflation thesis, not a buy recommendation.
32:35But then you look at Capital One, which is the biggest subprime lender. And you talk about the K-shaped economy and you talk about automobile defaults and credit card delinquencies, Capital One, I think, was like 25% off, right? So the banks, there's two things going on. There's this whole deregulatory side, and then there's like a lot of wounded financials that are exposed to the K-shaped economy.
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