PSP and Trinitas Accused of Greenwashing Hawaiian ESG Investment

Institutional Investor
by Julie Segal –

A Canadian pension fund and its private equity partner come under fire. –

Canada’s PSP Investments, which invests for the Public Sector Pension Investment Board, is under fire for greenwashing a sustainable investment in Hawaii. –

Responsible Markets, a 20-year-old consulting firm in Hawaii focused on the environmental, social, and governance impact of investments, has published a detailed case study arguing that PSP’s $600 million investment through a joint venture called Mahi Pono in a former sugar plantation in Maui, Hawaii is not in accord with PSP’s own ESG standards.

The findings from the year-long research project comes as a critical mass of pensions, endowments, and other institutions publicly commit to investments that meet comprehensive ESG and sustainability goals as well as financial returns. Asset managers, especially those in the U.S, are scrambling to keep up.

The allegations of greenwashing illustrate the complexity of sustainable and ESG investing, particularly when external managers are used.

Mahi Pono, a farming venture between the Public Sector Pension Investment Board and Pomona Farming, a subsidiary of private equity firm Trinitas Partners, purchased the 41,000 acres of farmland in Hawaii in December 2018. At the time, PSP said that, among other things, the deal would ensure that the land would continue to be used for agriculture, that green space would be preserved in Central Maui, and that the acreage would be a long-term source of revenue for the local economy. The project was also intended to create food security for residents and local jobs.

But Responsible Markets argues that Mahi Pono depends on securing water at rates that are exploitative to indigenous Hawaiians and diverts water from local farmland.

“Rather than creating local food security as the company has promised, the Mahi Pono business plan is dependent on export crops,” wrote Shay Chan Hodges, a co-organizer of Responsible Markets’ initiative, the Maui ESG Project, and co-author of the report. “Additionally, the company operates secretively and with little transparency, and has failed to generate the number of jobs promised.”

According to the report, called “From the Mountains to the Sea: When Big Money Moved in on Maui’s Agriculture,” PSP Investments and its external manager use the language of ESG and impact investments, but the results haven’t yielded benefits in line with that narrative.

Ryon Paton, president of Pomona Farming and Executive Chairman of Mahi Pono, said the project is enormously complex and still in its infancy. For example, the project involves investing $30 million to upgrade an old gravity-fed water system that was in disrepair. “The overarching goal is to provide clean foods to the local Hawaiian market and for export,” he said. Paton added that rates paid for water are determined in a public forum and the manager has filed an environmental impact statement. The manager is now in the process of responding to 500 comments it has received from the public. “The long-term lease rationalization process is public and anybody can bid on the right to the water. We don’t negotiate that directly,” he said.

[II Deep Dive: ‘I Will Get Very Serious About ESG — But Not Yet,’ Allocators Claim]

Responsible Markets wants PSP to meet with the community in Maui to understand the problems that the project is causing, as well as what it calls missed opportunities. It also lays part of the blame on PSP’s engagement of an external manager. “True community intelligence is invaluable and cannot be outsourced to investment managers and advisors,” according to the report.

The case study alleges that Trinitas has a history of making questionable sustainable investments, particularly when it comes to water. According to the report, “Trinitas Partners and their affiliates have shown themselves to be masters of sustainable investment rhetoric, [but] the on the ground realities of their agricultural investments show a much more complex picture.” The case study outlines a deal that the partners executed in California, which converted land from vineyards and other crops into almond farms. Almond farming has become a hot button issue in California as these farms use significant amounts of water. Paton stressed that its orchards in California have received the highest level of sustainable certifications.

“Capital markets have become so intermediated that it’s difficult for investment professionals within a large institution to understand what’s happening on the ground,” Delilah Rothenberg, founder of Development Capital Strategies, an advisory firm specializing in sustainable and responsible investment, told II. “A lot of investors do hide behind the excuse of using external managers until there’s enough of a backlash where they have to address the issues,” she added. Rothenberg isn’t familiar with PSP’s Maui investments and couldn’t comment on the case study in particular.

10 Best Dividend Stocks For 2021

Insider Monkey
by Fahad Saleem –

8. Realty Income Corporation (NYSE: O)
Dividend Yield: 4.55% –
Number of Hedge Fund Holders: 24 –

Realty Income Corporation is one of the best dividend stocks to for 2021. The REIT buys and sells properties, and offers services like portfolio management, asset management, credit and real estate research. The company in February said that it expects strong acquisition volume of more than $3.25 billion, or $3.44-$3.49 per share in terms of FFO, in 2021, above the average analyst estimate of $3.43. The company recently bought a 21-asset gas station and convenience store portfolio in Hawaii from Par Pacific Holdings for $109.4 million.

With a $61.4 million stake in Realty Income Corp., Two Sigma Advisors owns 987,364 shares of the company as of the end of the fourth quarter of 2020. Our database shows that 24 hedge funds held stakes in Realty Income Corp. as of the end of the fourth quarter.

Maui Land narrows loss while it awaits land sale

Star Advertiser –
By Andrew Gomes –

Maui Land & Pineapple Co. generated less revenue last year amid the coronavirus pandemic but reduced its bottom-line loss from 2019. –

The company, which developed Kapalua Resort and once farmed pineapple but now mainly leases former plantation lands to tenants, lost $2.6 million last year, compared with a $10.4 million loss the year before, according to an annual report released Tuesday.

Maui Land said disruptions to tourism on Maui because of COVID-19 hurt company revenue from real estate leases as well as a club membership program that contributed to revenue falling 25% to $7.5 million last year from $10 million the year before.

However, the company’s 2019 loss was bigger because of two extraordinary items: a contested $5 million tax refund allowance and a $3.6 million noncash charge for reducing the value of some real estate.

Last year Maui Land offset some of its leasing revenue decline with the sale of 5 acres of agricultural land for $600,000. The buyer, Maui County, plans to use the land to expand its Lahaina wastewater system. Maui Land also received $900,000 as returned cash collateral from an insurance program of dissolved timeshare joint-venture development firm Kapalua Bay Holdings.

Maui Land anticipated selling 46 acres at Kapalua Resort for $43.9 million last year, but the deal didn’t close as expected in September because of COVID-19 restrictions. The company said selling the property, which has long been planned for residential and commercial development, is now expected to happen in mid-August.

The Kapalua-based company with 17 employees also tried to improve its finances last year with a potentially forgivable $246,500 federal Paycheck Protection Program loan but decided to return the loan proceeds based on guidance from the U.S. Small Business Administration that intended for the program to help small businesses that lack significant access to capital.

Maui Land’s financial results last year included a $740,000 fourth-quarter loss on $2.1 million in revenue that compared with a 2019 fourth-quarter loss of $9.1 million on $2.5 million in revenue.

Shares of Maui Land stock on the New York Stock Exchange closed Tuesday at $11.73. Shares over the last 52 weeks have closed between $13.50 on March 4 and $8.92 on March 23.

Zim files papers to start 2021 with New York shipping IPO

By Eric Martin –

Fundraiser could seek $100m as Israeli operator seeks access to public equity markets.

Zim Integrated Shipping Services has filed papers to launch an initial public offering in New York, in a bid to make good on long mooted plans to go public.

The Israeli containership operator aims to list its shares on the New York Stock Exchange, where it will trade under ticker symbol ZIM, in a move that, if successful, would break a long absence of shipping IPOs on US capital markets.

The Haifa-based company did not give a timing for the IPO but pencilled in the aggregate value for the potential share sale at $100m.

Zim said that the main goal of the effort is to add to working capital and to create a public market for its shares, which would allow it to access equity markets in the future.

“We intend to use the net proceeds from this offering to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes,” the outfit said in a draft prospectus.

The effort is backed by banks Citigroup, Goldman Sachs and Barclays as global coordinators, with Jefferies and Clarksons Platou Securities on board as joint bookrunners for the offering, according to the document.

A listing in New York would make Zim the second container liner operator listed on US stock markets, alongside Hawaii’s Matson.

International profile

Unlike Matson, which owns its vessels and is mostly focused on protected US trades, Zim brings a mostly chartered-in fleet and a global profile. It is ranked as the 10th largest operator by aggregate fleet capacity.

Its unique profile relative to other US-listed shipping stocks could work to advantage.

“The market loves logistics and hates the shippers [shipping companies], most of which erroneously get lumped into the same bucket as tankers and correlate with energy,” said J Mintzmyer, lead researcher at Value Investor’s Edge.

“I think Zim has a good chance to help break this cycle by clearly pitching the global logistics business, plus the timing is perfect as we’re in the middle of the biggest containership boom in a decade.”

Eli Glickman-led Zim, which recorded a record profit in the third quarter amid booming box rates, had made no secret of its intentions to go public. The company was reportedly eyeing London and New York as potential locations for a listing, apparently choosing latter.

“We are a global, asset-light container liner shipping company with leadership positions in niche markets where we believe we have distinct competitive advantages that allow us to maximize our market position and profitability,” Zim said in the draft prospectus filed with the US Securities and exchange commission.

The company owns just one vessel, with its remaining 69 ships brought in through charter deals, the IPO papers show.

Zim operates 66 weekly lines serving 310 ports in 80 countries. The company, which carried 2.82m teu in cargo last year, has an aggregate fleet capacity of 359,000 teu.

The company’s largest shareholder is Idan Ofer’s Kenon Holdings, which holds a 32% slice. Deutsche Bank owns 16.7% of Zim’s shares, while Greek containership owner Danaos holds 10.2%.

7 Travel Stocks That May Have More Downside Ahead

By Josh Enomoto –

Despite warnings against mass travel issued by the Centers for Disease Control and Prevention, many Americans ignored such requests. In fact, as CNN recently reported that the Transportation Security Administration screened 1.17 million air passengers, a single-day record since the novel coronavirus pandemic began. At first glance, this appears to bode very well for travel stocks.

As the mainstream media constantly reminds us, we’re in the middle of a massive surge in new Covid-19 cases. At time of writing, the seven-day average of new daily infections is just under 160,000. Presumably, this figure will skyrocket as the uptick in travel and close contact with others raises overall vulnerability. As well, we’ve seen more than an average of 1,000 people succumb to the coronavirus over the past few weeks.

Yet that doesn’t seem to bother nearly as many people as you might assume, which initially appears a huge relief for travel stocks. Apparently, the power of cabin fever combined with Covid fatigue is enough to overcome fears of the pandemic. And sure enough, when you consider the probability of dying from SARS-CoV-2, the chances are incredibly slim.

Still, I wouldn’t go overboard on travel stocks just yet. According to data from, while Americans are eager to travel, many households have made drastic changes to their traveling methods due to Covid-19. Most notably, a majority (or 54%) plan to travel by car for the holidays this year, while plane and train travel represent 34% and 11%, respectively.

Further, Americans prefer to travel by car because of coronavirus fears, even when the travel distance increases significantly. For instance, slightly more than two-thirds of travelers prefer driving when the journey is less than 300 miles, which isn’t surprising. However, even when the distance is over 300 miles, a majority prefer cars over planes.

To give you some context, the distance from Los Angeles to Salt Lake City, Utah is about 690 miles, or nearly 11 hours of driving. From LA to Albuquerque, New Mexico is just under 800 miles, or 12-and-a-half hours of driving. If anything, it’s time to be skeptical about these travel stocks:

American Airlines (NASDAQ:AAL)
Spirit Airlines (NYSE:SAVE)
Hawaiian Holdings (NASDAQ:HA)
Park Hotels & Resorts (NYSE:PK)
Ruth’s Hospitality Group (NASDAQ:RUTH)

To be fair, there’s a case to be made that this pandemic is on its last legs. Additionally, people eventually acclimate to their environment. That might be true. However, consumer sentiment indicates that people are shifting their purchasing behaviors and not necessarily in a manner conducive for leisure. Therefore, certain travel stocks may face downside risk before their trajectory improves.

Travel Stocks to Sell:

American Airlines (AAL)
It doesn’t take a rocket scientist to understand why the airline industry crumbled amid the coronavirus outbreak. However, as we near the dubious one-year anniversary of the global crisis, people everywhere have gradually adjusted to the new normal. In theory, this should help support American Airlines. Indeed, AAL stock has jumped over 27% in the trailing six-month period.

But is that enough to justify travel stocks exposed to the airliner industry? Of course, air travel itself will be a viable business. Unless we invent a new form of global transportation, flying remains the most convenient and often times cost effective method. However, the sector could become a game of musical chairs, not unlike what we’re seeing in the oil market. That wouldn’t bode well for AAL stock, which has a huge debt load relative to the competition.

Moreover, how would that debt load impact its ambitions post-pandemic? More than likely, the competition will be eager to aggressively push promotions and routes to claw back lost revenues. But American Airlines won’t have as much leverage than its rivals. That makes AAL stock risky, even if other travel stocks pick up based on consumers shedding Covid-19 fears.

Spirit Airlines (SAVE)
On the surface, Spirit Airlines should be one of the travel stocks to buy. If the coronavirus was just a matter of a health risk, deciding which airliner to buy might as well be a blind wager. However, because this is an economic crisis, SAVE stock stands out positively. After all, if travelers have already gotten over their fears of Covid-19, then the only hurdle they must traverse is the financial one.

Further, that’s what data from suggests: “64% of travelers said they’ve budgeted more money for travel this year than they did last year.” While that’s encouraging, on the flipside, “23% of people said they can’t afford to travel this year.” In other words, the economy for Spirit Airlines’ target demographic has gotten significantly weaker. Logically, this would likely be a headwind for SAVE stock.

Another factor to consider is the possible K-shaped economic recovery. This crisis has resulted in a bifurcated environment where the well to do have enjoyed a budget increase (i.e., no commuting), whereas lower-income households have badly struggled. If the rich represent the most air passengers, they may opt for airliners that can provide superior services.

Hawaiian Holdings (HA)
Among travel stocks, Hawaiian Holdings may actually hold the dubious distinction of garnering the most skepticism. Under any other circumstance, Hawaii is a dream destination, a literal island paradise. All other things being equal, such a place might be the ideal location for waiting out the coronavirus pandemic. Naturally, that’s exactly what Hawaiian officials realized, thus implementing strict travel protocols.

Unfortunately, Hawaii’s actions don’t occur in a vacuum. By that, I mean Hawaii’s economy is substantially tied to tourism, with the industry accounting for roughly 23% of local economic activity. But with Covid-19 fears spreading everywhere, few people wanted to up and travel to the island state. Of course, this has been devastating for HA stock.

Fundamentally, the crisis will continue to weigh disproportionately on Hawaiian. According to the Bureau of Transportation Statistics, the average passenger load factor for all American carriers was 49% in August. For Hawaiian Airlines, it was a devastating 23.7%.

Back in 2019, the average load factor for the beleaguered company was over 87%, in line with other airliners. Put another way, rising Covid-19 cases is no laughing matter for HA stock.

Park Hotels & Resorts (PK)
Another example of travel stocks that seemingly should do well in the present environment is Park Hotels & Resorts. As I stated earlier, a post-coronavirus record number of travelers hit the road and the friendly skies over Thanksgiving weekend. In theory, this should bode well for PK stock. Park Hotels & Resorts is a real-estate investment trust specializing in high-profile lodgings.

While shares have jumped higher over the trailing month — we’re talking about 60% up — prospective investors should be cautious. True, rich people are traveling but just as many are staying home. As evidence, you can look at the meteoric rise of Peloton Interactive (NASDAQ:PTON) during this Covid-19 pandemic. Yes, affluent people have access to gym memberships but they’re eschewing that for at-home exercise equipment.

In addition, the overwhelming use of personal vehicles over air travel suggests that many traveling consumers are on a budget. Plus, they might be more sensitive to Covid-19 fears; hence, the method of travel.

Therefore, hotel investments like PK stock might not fare well if coronavirus cases worsen. And the price point that the underlying lodgings command makes it out of the question for many travelers.

Comcast (CMCSA)
If I had to cast a vote for worst governor in the history of the United States, my vote would go to none other than California’s Gavin Newsom. If you like him, it’s probably because you don’t live in California. He and the activist arm of the Democrats appear hellbent on destroying the state’s economy by considering more draconian stay-at-home orders.

Of course, the rules don’t apply to Gavin Newsom. But they do apply to businesses of every size, including massive ones like Comcast. And that is going to be a tricky problem for CMCSA stock.

In the pre-Covid days, Comcast represented one of the more viable travel stocks. With prime theme parks located in almost-always sunny California (and Florida during non-hurricane seasons), CMCSA stock at the right price offered a solid anchor for your portfolio. But with California-based assets shut down, this was a shock to the system.

True, Comcast isn’t as heavily levered to theme parks as rival Disney (NYSE:DIS). But over the long term, Disney’s arguably more enviable entertainment brands provide a comparatively robust pathway to recovery. Therefore, investors ought to be careful, especially if cases worsen nationwide.

Ruth’s Hospitality Group (RUTH)
As one of the premiere restaurant companies, Ruth’s Hospitality Group generally enjoyed positive returns for three-quarters of President Trump’s administration. Thanks to record-low unemployment across most demographics, RUTH stock benefitted tremendously from this most bullish of bull markets. Sadly, not even Ruth’s wealthy clientele could save shares from the destruction seen in other travel stocks.

A New York Times article this past summer helps explain why. According to the report, the top 25% in income level reduced their spending the most during the initial onslaught of the coronavirus. This action invariably left out service workers in the cold, who depended on their patronage. Therefore, we can assume that a similar headwind impacted RUTH stock.

After all, when you’re in one of these swanky restaurants, it’s not just about the food that makes the place special. It’s a moment to be seen by others, a hallmark of great financial success. With that element gone, Ruth’s business took a hit. Moreover, with many people traveling on a budget, they’ll likely eschew Ruth’s for any old eatery.

Lyft (LYFT)
Prior to the pandemic, the ride-sharing sector represented one of the most promising travel stocks. Suddenly, anybody with a properly functioning car and a smartphone could become a taxi driver and on their terms. The creation of a new revenue channel that is conveniently available to all initially boosted interest in companies like Lyft. However, the pandemic was exactly what LYFT stock didn’t need.

As people began sheltering in place, the ride-sharing sector careened to a halt. Even after the initial recovery from the March doldrums, LYFT stock meandered aimlessly for several months. However, with the electoral victory of Joe Biden (though this is still contested, to be fair), LYFT finally enjoyed price action worthy of its ticker name.

Unfortunately, recent sessions indicate that shares may have some problems moving higher. As I pointed out earlier, consumer data indicates that many people are traveling by car, even for incredibly long distances. That’s hugely problematic for Lyft as demand for air and train travel take a backseat. Although shares may eventually recover, the current circumstances warrant caution.

5 Stocks With Recent Price Strength to Tap Market Rally

By Nalak Das –

The U.S. stock market has performed fairly well year to date despite the coronavirus onslaught over the last few months. Wall Street has performed fairly well so far in 2020 after recovering impressively from the pandemic-led bear market. At present, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory year to date.

The Dow slipped to bear territory on Mar 11 and was joined by the S&P 500 and the Nasdaq Composite a day later. The downtrend continued till Mar 23 when all the three major stock indexes slumped. Wall Street has witnessed a V-shaped recovery since Mar 23 barring fluctuations in September and October, which helped it to exit the coronavirus-induced short bear market and form a new bull market.

On Dec 4, the three above-mentioned large-cap centric indexes along with the mid-cap specific S&P 400 and small-cap centric Russell 2000 and S&P 600 indexes recorded all-time highs. This impressive turnaround was predominantly driven by the astonishing growth of large-cap technology stocks together with the cyclical reopening stocks on COVID-19 vaccine hopes.

At this stage, wouldn’t it be a safer strategy to look for stocks that are winners and have the potential to gain further?

Sounds Good? Here’s How to Execute It:

One should primarily target stocks that have freshly been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria have narrowed down the search from over 7,700 stocks to just 14.

Here we present five out of those 14 stocks:

Aviat Networks Inc. AVNW designs, manufactures and sells an array of wireless networking products, solutions, and services in North America, Africa, the Middle East, Europe, Russia, Latin America, and the Asia Pacific.

The stock price has soared 61% in the past four weeks. The company has expected earnings growth of 95.4% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 18% over the last 30 days.

Merchants Bancorp MBIN operates as a diversified bank holding company in the United States. It operates through the Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments.

The stock price has jumped 27.1% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 33% over the last 60 days.

Honda Motor Co. Ltd. HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Life creation and Other Businesses.

The stock price has climbed 14.5% in the past four weeks. The company has expected earnings growth of 97.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 25.3% over the last 30 days.

APi Group Corp. APG provides commercial life safety solutions and industrial specialty services primarily in the United States. It operates through three segments: Safety Services, Specialty Services, and Industrial Services.

The stock price has surged 11.9% in the past four weeks. The company has expected earnings growth of 26.3% for next year. The Zacks Consensus Estimate for the current year has improved by 11.8% over the last 30 days.

Matson Inc. MATX provides ocean transportation and logistics services. Its Ocean Transportation segment offers ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska, and Guam, as well as to other island economies in Micronesia.

The stock price has gained 4.7% in the past four weeks. The company has expected earnings growth of 94.8% for the current year. The Zacks Consensus Estimate for the current year has improved 24% over the last 30 days.

American Assets Trust Inc (AAT) Chairman, CEO & President Ernest S Rady Bought $1.5 million of Shares


Chairman, CEO & President of American Assets Trust Inc (30-Year Financial, Insider Trades) Ernest S Rady (insider trades) bought 50,089 shares of AAT on 12/01/2020 at an average price of $28.99 a share. The total cost of this purchase was $1.5 million.

American Assets Trust Inc is a self-administered real estate investment trust based in the United States. The company mainly invests in, operates, and develops retail, office, residential, and mixed-use properties in California, Oregon, and Hawaii. American Assets Trust Inc has a market cap of $1.79 billion; its shares were traded at around $29.67 with a P/E ratio of 47.09 and P/S ratio of 6.23. The dividend yield of American Assets Trust Inc stocks is 3.55%. American Assets Trust Inc had annual average EBITDA growth of 4.80% over the past ten years.

CEO Recent Trades:

Chairman, CEO & President, 10% Owner Ernest S Rady bought 50,089 shares of AAT stock on 12/01/2020 at the average price of $28.99. The price of the stock has increased by 2.35% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 2,194 shares of AAT stock on 11/20/2020 at the average price of $28.77. The price of the stock has increased by 3.13% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 54,994 shares of AAT stock on 11/11/2020 at the average price of $25.72. The price of the stock has increased by 15.36% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 130,000 shares of AAT stock on 11/06/2020 at the average price of $21.49. The price of the stock has increased by 38.06% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 175,739 shares of AAT stock on 11/04/2020 at the average price of $21.64. The price of the stock has increased by 37.11% since.

Bank of Hawaii’s(NYSE:BOH) Share Price Is Down 17% Over The Past Year.


It is a pleasure to report that the Bank of Hawaii Corporation (NYSE:BOH) is up 35% in the last quarter. But in truth the last year hasn’t been good for the share price. The cold reality is that the stock has dropped 17% in one year, under-performing the market.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Bank of Hawaii had to report a 22% decline in EPS over the last year. The share price fall of 17% isn’t as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Bank of Hawaii’s earnings, revenue and cash flow.

What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bank of Hawaii, it has a TSR of -14% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective
Investors in Bank of Hawaii had a tough year, with a total loss of 14% (including dividends), against a market gain of about 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Bank of Hawaii better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Bank of Hawaii .

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Bank Of Hawaii Corporation: Wildly Mixed Performance

Seeking Alpha
Prepared by Stephanie –


  • Q3 was a very mixed quarter.
  • Book value improved slightly while the headline numbers were crushed.
  • Asset quality remains a concern, though it is improving.
  • Net interest margin was crushed while non-interest income fell 20%.
  • Shares are overvalued.

As our followers are aware, we have provided an overview of the key metrics of a number of regional banks in the last few weeks. This is mainly because we believe that the financials offer tremendous upside in a post-COVID world. But you have to get in ahead of the herd. For the last few months, we have seen how low interest rates have weighed heavily on banks’ operational performance, and pressure on bond yields have kept these stocks down for months despite the broader averages rebounding with authority since the March lows. However, in just the last few days following the US Presidential Election as well as news of a promising COVID-19 vaccine, bond yields are moving and the outlook for banks has improved. Overall, the banks may have spiked a little too sharply, so let them pull back before you buy. That said, the financials are a sector you should be buying for the long term in our opinion.

Here is the thing. Although provisions for loan losses have spiked this year on fears of borrowers being unable pay their loans, this risk seems to be declining in the last few weeks. This feeling is especially compounded on the belief that we are going to successfully move past COVID next year. One name that we find interesting is the Bank of Hawaii Corporation (BOH). As you can imagine, this is a regional bank in the Hawaiian Islands. The bank has recently reported earnings, and with a 4% dividend yield, we like the stock, but think there are some risks that suggest you should wait for a pullback to buy.

Revenue actually declined
We saw they have good loan activity, increased deposits, and a respectable net interest margin. Overall, the bank saw revenues decline. In Q3, the company reported a top line that fell from Q3 2019. With the present quarter’s revenues of $165.9 million, the company notched a 3.2% decrease in this metric year over year. As we have noted, performance on this line has been mixed with many other regional banks having seen flat to down revenues versus last year, while others saw increases. This was one of the many that posted declines in revenues we had seen.

Earnings follow revenues lower

The decline in revenues year over year was compounded by an increase in loan loss provisions from last year and the sequential quarter. While an increased provision from last year was expected in estimates, the results were better than expected actually. Overall, the financial results for the third quarter largely reflect current conditions at the local, national and global level. The Bank of Hawaii Corporation saw net income of $37.8 million, or $0.95 per share, compared to $52.1 million, or $1.29 per share, in the same quarter of 2019. This was above expectations actually. However, it was a decline from the sequential second quarter’s $0.98 as well. While the headline performance may spook you, keep in mind the Hawaiian economy is heavily dependent on tourism and that has been ravaged. We did note that book value improved.

Book value improves but stretched valuation noted

We like to buy quality banks when they are near or below book value. This bank stock has always traded above book value, so we keep that in mind when looking at valuation. However, the valuation is certainly concerning relative to book. While momentum is so strong right now, the stock is definitely above fair value, especially now that the stock is rocketing higher. With this move, it is expensive. The bank’s stock is $72.10 which is up nicely in the last few weeks but is now way above book value. Book value per share was $33.99 at the end of Q3 2020 compared to $33.76 at the end of Q2 2020. We love to see this movement. Still, shares are expensive when we consider tangible book value per share. Most bank stocks are valued higher than tangible book value, but here we are talking more than a 100% premium. Tangible book was $33.21 at the end of Q3 2020 compared to $32.97 at the start of the quarter. Overall, we think this is really expensive. But maybe it does not matter because it has always been at a premium. Still, we would feel much better if investors waited for the price to fall back toward $60, which is still pricey, even if the stock has always been valued like this.

Movement in loans and deposits
So, with the action in the top and bottom lines, as well as the increases in book value, we need to dig further. We should understand what is going on with loans and deposits. Here is the interesting thing. Loans and deposits are up from a year ago. But as we will see, asset quality is an issue. But the reason the company saw lower headline performance was a severely pinched net interest margin, 2.67% versus 2.83% in Q2 2020, as well as non-interest income dropping 20% from Q2 as well. Still, there was positive movement in loans and deposits.

Total loans and leases were $11.8 billion at September 30, 2020. Average total loans and leases were $11.7 billion during quarter, up slightly from the previous quarter and up 9.0% from $10.8 billion during the same quarter last year. You will note the dichotomy between commercial and consumer holdings. The commercial loan portfolio was $5.0 billion at September 30, 2020, down $5.9 million or 0.1% from June 30, 2020. However, this was up $860.1 million or 20.7% from September 30, 2019. The consumer loan portfolio was $6.8 billion at September 30, 2020, down $5.9 million or 0.1% from June 30, 2020, and up $52.2 million or 0.8% from September 30, 2019.

Consumer deposits were up nicely, while commercial deposits fell sharply. Total deposits were $17.7 billion at September 30, 2020. Average total deposits were $17.3 billion during the third quarter of 2020, up 3.5% from $16.7 billion during the previous quarter and up 12.7% from $15.3 billion during the same quarter last year. Consumer deposits increased to $8.9 billion at September 30, 2020, up $136.9 million or 1.6% from $8.8 billion at June 30, 2020 and up $1.0 billion or 12.8% from $7.9 billion at September 30, 2019.

On the other hand, commercial deposits were $7.2 billion at September 30, 2020, down $135.5 million or 1.9% from $7.3 billion at June 30, 2020 but were up $1.0 billion or 16.3% from $6.2 billion at September 30, 2019. Now, increased loan activity is great, but we have to watch asset quality metrics.

Asset quality is something you should watch each quarter
The quality of the bank’s assets has eroded during the COVID crisis. However, asset quality remained relatively stable during Q3. What killed earnings was the loan loss provisions. Provisions for credit losses did improve to $28.6 million at September 30, 2020 compared with $40.4 million at June 30, 2020 and was also nearly seven times as high as $4.25 million at September 30, 2019. However, the allowance for credit losses was $203.5 million at September 30, 2020 compared with $173.4 million at June 30, 2020.

Total non-performing assets were $18.6 million at September 30, 2020, down from $22.7 million at June 30, 2020 and $21.6 million at September 30, 2019. As a percentage of total loans and leases, including foreclosed real estate, non-performing assets were 0.16%, down from 0.19% at the end of the previous quarter. We saw good movement in charge-offs. Net loan and lease charge-offs during Q3 were actually a net recovery of $1.5 million. Loan and lease charge-offs of $2.3 million during the quarter were fully offset by recoveries of $3.8 million. This was a big improvement from Q2. In Q2, we saw net charge-offs of $5.1 million or 0.18% annualized of total average loans and leases outstanding and comprised of $8.3 million in charge-offs and recoveries of $3.2 million.

Take home here
This was a wildly mixed quarter. While loans and deposits are up, asset quality is an issue, while the ability to make money has eroded thanks to rates. However, the stock has rocketed higher on the back of an improving rate outlook. We think you fade this rally unless you are looking to simply make a momentum trade. Book value improved nicely in the quarter, but shares are overvalued.