06/27/2025
For Portfolio II, III, IV
Hingham Institution of Saving (HIFS)
Decrease the position of Hingham Institution of Savings 50%
Decrease the investment in Hingham Institution of Saving is due to the following reason.
The uncertainty of inflation. Even the inflation will be clear in later days, the interest rate in the marketplace will be affected greatly by other factors.
US currency dominance in the world is changing. In recent days, several countries of different region are moving away from US dollar and Euro is gaining strength. Moreover, countries in Asia are trying to form alliance and move away from US dollar for global trade. Such movement will decrease the creditworthy of US currency.
National debt of the United States is reaching a level of unsustained. Never a business or home hold can have great debt and without bankruptcy. The money of a trillion interest payment can have lots of utilization. Such debt level will definitely reduce the creditworthy of the United States and increase the borrowing cost. Should have the auction of US Treasury been failed, bond market is going to be terrible. So will be the mortgage market.
The real worry for citizen of the United States is the "real interest rate" in the financial market. In the past year, the mortgage rate remains in a elevated level even Federal Reserve reduces fund rate. Such indication points to the higher borrowing cost for ordinary people.
Investment in Hingham should be reduced.
Again, concentration investing involves higher risk of significant loss without the protection of diversity.
Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.
01/07/2025
For Portfolio IV
Hingham Institution of Savings (HIFS)
Reduce the position of HIFS to 7% of Portfolio IV
Risk adjustment
We believe that hold HIFS in such significant position has lost its appeal because of the risk of elevated uncertainty due to the following reasons
First, the continuous persistence of core inflation is lingering and strong job market continues to fuel spending. Also, there are more uncertain economic factors going into 2025 than 2024. Even the overall economy is healthy, those uncertain factors may restrict consumers' purchasing power and impedes economy growth.
In the financial market front, the bond traders do not have a good expectation for bond market. Traders push 10 year treasury price down resulting yield of 4.5% this week even though Federal Reserve cuts fund rate one quarter of a percentage and predicts two more cuts in 2025.
Furthermore, global economy is slowing down in most of regions except here in the United States. Eventually, our trading partners are going to have some effect on ours. If that is the case, the persistent inflation here will have a bigger impact on financial market.
However, this reduction is temporary. How long is the uncertainty depending on Federal Reserve's interest rate policy aka bring down the interest rate.
Again, concentration investing involves higher risk of significant loss without the protection of diversity.
Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.
07/25/2024
For Portfolio II, III, IV
Increase the positions
Increase the holding of Hingham Institution for Savings (HIFS) to 20% of the Portfolio III.
Hingham Institution for Savings passed a turn point in second quarter of 2024. Its interest margin expanded in the 2Q 2024 which produced higher net interest income. Loan and revenue continue to grow. Also, the bank managed to lower interest expense at very low level quarter to quarter (see Financial Data). In addition, the repriced loans have generated more interest income with higher rate.
The result is that declining trend of net interest income has stopped and the net interest income of 2Q 2024 has turned to growth quarter to quarter. We believe from this point on that interest margin will continue to expand and restore the bank's profitability to the level of early 2022. Due to the fact, Federal Reserve will begin to cut interest rate in the second half of 2024 which will lead to dramatic decline of borrowing cost for HIFS, especially the cost of FHLB Advance (the biggest cost of interest expense). This should be the first solid leg up for Hingham Institution for Savings. Plus, it is the first time we see a major news outlet report on the bank, AP.
Again, concentration investing involves higher risk of significant loss without the protection of diversity.
Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.
02/13/2024
For Portfolio III
Increase investing position
Increase additional 5% of investment for Hingham Institution for Savings (HIFS) in the Portfolio III.
From time to time, we would like to increase the position of Hingham Institution for Savings for Portfolio III whenever an opportunity is presented.
HIFS is priced below its tangible book value now, and it represents a 2021-earning (prior the beginning of increase of Federal fund rate) to common stock price ratio of approximate 18%. It means that HIFS will earn investors 18% of return annually if investors wholly own the HIFS and the earning remains constantly.
Again, concentration investing involves higher risk of significant loss without the protection of diversity.
Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.
01/12/2024
For Portfolio III
Initiate an investing position
Hingham Institution for Savings (HIFS)
Initiate an investment of Hingham Institution for Savings (HIFS) to 7% of Portfolio III.
Hingham Institution for Savings is one of oldest banks in the Unites States, but it is still a very small business. Slow and steady growth has been benefiting shareholders since the Gaughen family took over the company.
Company primarily focus on commercial real estate loans. This type of loans involves higher risk than residential owner occupies loans. HIFS implements several safeguards to reduce the risk of those loans. It requires that loan-to-value does not exceed 75%, loans must be approved by a selected loan committee, a member of the committee will visit on-site twice annually.
On the deposit side, the company relies heavily on Federal Home Loan Banks for capital to its lending business. It cost the company higher interest expenses than usual customer deposits, but the source of capital from FHLB is much stable than customer deposit.
Also, the company utilizes Network Deposit and DIF to ensure customers' deposit which exceed the FDIC limit.
At this cycle of monetary tightening, HIFS's bottom line has been hurting mainly due to the much higher interest expense paid to FHLB. There is more than 2% of interest margin vanished. However, due to the company's low cost operation, company continue to grow its loan portfolio despite of this cycle of raising interest rate. We believe HIFS will return its profitability and earning growth once Federal Reverse begins to reduce interest rate, and eventually the return of valuation.
Again, concentration investing involves higher risk of significant loss without the protection of diversity.
Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.