Gator Capital: “Credit Suisse (CS)’s Stock Will Probably Underperform its Peers for Several Years”

Gator Capital Management, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 10.64% was recorded by the fund for the Q1 of 2021, outperforming the S&P  500 Total Return Index that delivered a 6.18% return, but below the S&P 1500 Financials Index that had a 16.32% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Gator Capital Management, in its Q1 2021 investor letter, mentioned Credit Suisse Group AG (NYSE: CS), and shared their insights on the company. Credit Suisse Group AG is a Zürich, Switzerland-based investment banking company that currently has a $23.8 billion market capitalization. Since the beginning of the year, CS delivered a -19.45% return, while its 12-month gains are up by 22.59%. As of May 06, 2021, the stock closed at $10.37 per share.

Here is what Gator Capital Management has to say about Credit Suisse Group AG in its Q1 2021 investor letter:

“We were extremely disappointed with the news from Credit Suisse in March. We were blindsided with a double dose of management incompetence. In early March, Credit Suisse announced they were suspending redemptions on the bank’s investment funds related to Greensill’s trade finance business. Then, in late March, the bank announced that it had exposure to the family office Archegos. We believe that of all Wall Street banks, Credit Suisse had the worst response managing the risk presented by Archegos. The combination of these two events in the same month made it clear that the bank does not have adequate risk controls.

We sold our position in Credit Suisse in late March, ending a three-year period of holding shares in the company. Our investment thesis had been Credit Suisse 1) was a global wealth management franchise with an attractive growth rate, 2) had a low-risk, highly profitable domestic Swiss banking franchise, 3) had reduced capital intensity and volatility in the investment bank, and 4) traded for just 75% of tangible book and 8x forward earnings. We believe the bank will be in the penalty box with investors for multiple years due to these risk management failures. We view this situation as similar to Wells Fargo’s account opening scandal from four years ago. Wells Fargo has underperformed the S&P 1500 Financials Index by 95% during that. We believe Credit Suisse’s stock will probably underperform its peers for several years as well.”


Our calculations show that Credit Suisse Group AG (NYSE: CS) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Credit Suisse Group AG was in 11 hedge fund portfolios, compared to 13 funds in the third quarter. CS delivered a -24.32% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.