📉 Home Capital Group’s stock plummeted due to fears related to the Canadian economy and subprime mortgages.
✅ Warren Buffett invested in the company after analyzing its financials and determining that the market’s reaction was overblown.
💰 The company was later acquired at a valuation that multiplied Buffett’s investment, demonstrating the potential of value investing during crises.
@Artedeinvertir:
“Then this news is from 2017 and it appears here in the CBC, which is one of the main economic media in Canada, how Warren Buffett invested in a small unknown company called Home Capital Group 400 million. So this company that was trading here near 0, collapsed, it was a case also, it was trading almost at the same price as Aircap, it came to collapse to $9. This company what it did was a sector a little similar to that of Gois, it gave mortgages, what happens is that it is subprime in Canada. Of course, everyone remembered the crisis of 2008 and the stock began to fall. Why? Because the economy of Canada was a little weaker in 2015, 2016 because all the raw materials fell a lot, oil, gas, certain raw materials such as iron ore, copper and others. So the economy of Canada is quite because it is a great producer and exporter of this type of raw materials. So people began to panic about whether the company was going to have problems. Now we will see the accounts and what really happened to it, but what did Warren Buffett do here when there was this great volume? You see here how the trading volume shot up, that is already a symptom that there is panic. You see that normally the bars of traded volume are very low, the volume that was traded in the years after, but there were a few weeks that concentrated a lot of volume and that also tends to be a good indicator of when there is panic because a large fall in the stock market together with very large volumes may be an opportunity. Beware, it does not mean that we have to buy every time this situation of volume and a very large fall happens because it is what we said before, it may be that the company really people know that this is correct, has debt, is going to go bankrupt and you will never recover your money or you will be very touched because the company has to expand, dilute and not recover. But in this case, Warren Buffett analyzed what we are going to see next, he looked at a series of factors and realized that it was an incredible investment. What has happened after with this action that 5 years later has been taken over, has been excluded from the stock market at a valuation of $5. So again, he multiplied his money by approximately five times the point of investment. It is true that shortly after investing, as the stock recovered very quickly, he divested, the confinement lowered the stock and then again this was another specific fear, not so much volume, but it recovered.”
Watch the exact part of the video where Warren Buffett talks about Home Capital Group here:
View the video on YouTube.
Read more articles featuring the most recent analysis of Home Capital Group at this link: BLOG.
