Silvergate Capital Stock: Invest in a company at 40% CAGR (NYSE:SI)

Foryou13

The following segment is taken from this fund letter.


Silvergate Capital Corporation (NYSE:IF)

Our largest new position is Silvergate Capital Corporation, an FDIC-regulated and insured commercial bank and emerging leading service provider for the crypto space. Silvergate followed Cryptocurrencies have been down throughout the year, falling 56% year-to-date against Bitcoin down 59% and Ethereum down 65%. The company started out as a depository service provider for the crypto space, but has since developed its own Silvergate exchange network (SEN)).

SEN is a global payment network that enables real-time transfer of USD between its digital currency exchange clients (COIN, Genesis) and institutional clients 24/7/365. The company continues to innovate with its efforts to add stablecoins to its business mix following the acquisition of the Diem stablecoin project from Meta Platforms (META) earlier this year. With the market overly focused on a crypto winter, SI will benefit from increasingly becoming the partner of choice for exchanges and institutions in this rapidly changing market.

Additionally, 90% of Silvergate’s $13 billion assets are floating rate with no-fee deposit funding. This makes Silvergate one of the most interest rate sensitive financial services companies in the market today. Management noted that for every 25 basis point increase in interest rates, their net interest income (NII) would increase by $16 million over a 12-month period. It’s not often that Mr. Market allows the opportunity to invest in a company growing at a CAGR of 40% for the next two years, while trading at 13x the earnings of this year and 8x the next.


The Opportunity Equity composite performance figures reflected above include the deduction of a model investment management fee of 1% (the highest fee for segregated accounts under our fee schedule), paid quarterly and certain other expenses. For important information on the performance of the Opportunity Equity strategy, please click on the Opportunity Equity strategy composite performance disclosure. Past performance is not indicative of future results. All portfolio holdings and data reflect a representative Opportunity Equity account.

The contributors detailed above represent the top five stocks that contributed positively to performance during the quarter. The detractors detailed above represent the top five holdings that detracted from performance during the quarter. The information detailed above is provided gross of fees, inclusive of cash and is based on a representative account of Opportunity Equity. The contribution shown above represents the period the security was held during the quarter. For more information on how Top Contributors and Top Detractors were determined and/or to obtain a list showing the contribution of each holding to the performance of the representative Opportunity Equity account, contact us.

The information presented should not be considered a recommendation to buy or sell securities and should not be considered investment advice. It should not be assumed that any buy or sell decision will be profitable or match the performance of any stock mentioned. References to specific titles are for illustrative purposes only. The composition of the portfolio is indicated at any given time and may change without notice.

The views expressed in this commentary reflect those of Miller Value Partners analysts as of the date of the commentary. All opinions are subject to change at any time based on market or other conditions, and Miller Value Partners assumes no responsibility to update such opinions. The information presented should not be considered a recommendation to buy or sell securities and should not be considered investment advice. It should not be assumed that any buy or sell decision will be profitable or match the performance of any stock mentioned. Past performance is not indicative of future results.


Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

Sallie R. Loera