Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the fund returned 0.70% compared to a -0.66% return for the Russell 2000 Value Index. The firm expects the fund to outperform in down markets and trail in speculative markets. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
FPA Queens Road Small Cap Value Fund highlighted stocks like Axos Financial, Inc. (NYSE:AX) in the first quarter 2023 investor letter. Headquartered in Las Vegas, Nevada, Axos Financial, Inc. (NYSE:AX) provides banking and financing services. On May 4, 2023, Axos Financial, Inc. (NYSE:AX) stock closed at $37.07 per share. One-month return of Axos Financial, Inc. (NYSE:AX) was -0.05%, and its shares lost 0.96% of their value over the last 52 weeks. Axos Financial, Inc. (NYSE:AX) has a market capitalization of $2.191 billion.
FPA Queens Road Small Cap Value Fund made the following comment about Axos Financial, Inc. (NYSE:AX) in its Q1 2023 investor letter:
“Queens Road owns two small banks – ServisFirst, which is a core position, and Axos Financial, Inc. (NYSE:AX), which is a smaller position. While both banks were down for the quarter, both ServisFirst and Axos outperformed the regional bank indices. Additionally, both ServisFirst and Axos significantly outperformed the regional bank indices during the two weeks when bank collapse worries were most acute.
This is typical for Queens Road. We believe a focus on quality up front has led to out-performance in down markets. Silicon Valley Bank failed because of too much deposit concentration on the liability side and too much duration risk on the asset side. But also because management was too focused on earnings and forgot banking principles. We believe both ServisFirst and Axos have broadly diversified deposit bases, appropriately matched assets and liabilities and reasonable liquidity and leverage. And most importantly, both are run by founder management teams with a demonstrated history of prudent growth and disciplined risk management (Tom Broughton at ServisFirst and Greg Garrabrants at Axos). Any bank will have trouble liquidating assets to meet large deposit redemption requests in a short period of time, even if the assets are sound. But we think we own two of the best properties in a currently troubled neighborhood.
The recent regional bank crisis was typical for us in another way – we didn’t do very much. It seems to us that, even though the near-term crisis has abated, the range of medium term outcomes for small banks is unusually wide. Valuations are down, but life has gotten a lot harder for small banks – jittery depositors and regulators, rising funding rates and a rapid deceleration of credit growth. We dislike situations when there is a wide dispersion of potential outcomes. We have a strong preference for robustness and, in this type of scenario, we are skeptical of false precision – thinking we can get things exactly right. And so, we made small additions to our positions in ServisFirst and Axos as well as a handful of other companies in our portfolio that became available at what we believe are attractive valuations.”
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Axos Financial, Inc. (NYSE:AX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Axos Financial, Inc. (NYSE:AX) at the end of the fourth quarter which was 19 in the previous quarter.
We discussed Axos Financial, Inc. (NYSE:AX) in another article and shared Gator Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
