The Motley Fool Discussion Boards

Previous Page

Stocks B / Berkshire Hathaway


Subject:  Re: Maystery purchase Date:  11/4/2018  9:36 AM
Author:  TMFRichDad Number:  239431 of 243205

(2) are even the best really big bank franchises like WFC still truly interesting investments if they struggle to average 10% ROE?

Here's one quality that could make the answer yes under the right environment: During inflationary times, well run banks don't have to have a prayer meeting in order to raise prices. The cost of cars, boats, homes - all the things people borrow money for to buy will cost more over time due to inflation. This allows the banks to grow their loan books along with inflation more or less naturally due to the inherent traits of their business models.

Another, arguably even better, example would be card firms like V and MA that earn a percentage on each purchase made by a consumer. As the cost of goods bought increases due to inflation, their revenue increases naturally and no price increase is necessary. No prayer meeting required. Also, since they don't do any lending, there's no default risk. That can't be said for banks.

Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us