Berkshire Hathaway's Capital One stake is a way through 'troubled waters' in bank space: Strategist

AlphaSimplex Chief Research Strategist Katy Kaminski reacts to Berkshire Hathaway's $954 million stake in Capital One, commenting on the state of banks and the fixed-income sector amid economic conditions

Video Transcript

- On this Tuesday morning, shares of Capital One rallying after filings showed that Warren Buffett's Berkshire Hathaway took a nearly $1 billion stake in the company, buying 2.6% of the shares in the first quarter, this as Buffett dumped shares and Bank of New York Mellon and US Bancorp. Now, this is something he had sort of talked about, that he was doing here. And my caveat or my disclaimer, whenever we talk about 13F filings, they are a snapshot of one day.

Now, Warren Buffett, as we know, tends to buy and hold stakes. But we also don't know what's on the other side of the equation. Is he shorting? Is he hedging? Are there things he is not disclosing? So it doesn't give a sense literally a full picture of what's going on, but it does give us a little bit of an insight into what he is doing.

- Yeah. Even in our discussions ahead of the show, it was pointed out by our team that, yeah, this is also one of the largest lenders on the financial basis for auto purchases. Auto purchases here, especially for Warren Buffett's Berkshire Hathaway, they have already taken another stake. Last year they took a stake in Ally Financial, and that one of the other large player in autos.

So within that lending capacity, it'd be interesting to see where they perhaps are looking across the automotive landscape and where for some of the loans that both Capital One and Ally Financial, where that is appetizing for them to add on to their portfolio right now.

- Yeah. I want to bring Katy Kaminski back into this discussion because I think the regional bank discussion is still so interesting. Is that an area where you're looking at either banks broadly, regional banks specifically? Because it feels like there are a lot of headwinds still to come in this group.

KATY KAMINSKI: Yes. I mean, I think this comes back-- what I love that you're talking about Buffett here right now is he's a value investor. So they're looking at companies where they see value over the long term. And we got to remember, they were very successful back in 2008 in sifting through the rummage in a very extreme financial environment.

But what's interesting now is really the fixed-income angle of this, and which of these banks are the best positioned to deal with a very different rate environment, either inverted curve or, as we see, yields might be moving and we see capital rolling over and people trying to refinance it? I think that's where the interesting opportunities come in the space, is figuring out which banks are going to be better positioned to move as capital costs have changed significantly going through this tightening cycle that we've been through right now. And we've already seen that there's trouble in the waters with what happened earlier this year. And so the question is going to be which other banks are better positioned to move with the situation, and which of them are going to have more challenges because, perhaps, they're in an area, like you said, autos that is better, or another area, which is going to have more challenges?

- Yeah, absolutely. Katy, we have to-- we've got to shift gears here a little bit just after the Opening Bell. Katy Kaminski joining us this morning for all things discussion, wide ranging, I might add, debt ceiling all the way into Fed policy. Katy Kaminski of AlphaSimplex-- thanks so much, Katy.