Li Lu’s most recent 13F filing reveals that he picked up some 480,000 shares in East West Bancorp (NASDAQ:EWBC), now accounting for over 8% of his portfolio. EWBC is a bank that operates in the U.S. and Greater China. It services people and businesses in both countries synergistically and offers various services, such as loans, deposits, payments, and investments. EWBC is unique in that it bridges the gap between the U.S. and China and offers Asian-American citizens a tailored banking solution.
EWBC stock has been lagging behind the S&P 500 (SPX) and the KBW Bank Index this year despite delivering strong earnings and revenue growth in the past quarters. Therefore, as the year comes to a close, many investors are seeking ways to minimize their tax liabilities by selling off stocks that have performed poorly. This leads to a situation commonly referred to as tax-loss selling, where the prices of beaten-down stocks may experience more pressure.
Therefore, in this article, we will take a closer look at why Li Lu, also referred to as the “Chinese Warren Buffett,” decided to invest in EWBC and what makes it a compelling investment. I am bullish on EWBC stock for October and beyond, as it offers a combination of value, growth, and income at a steep tax-loss-selling discount. Investors who are willing to look past the short-term volatility and take a long-term view could be rewarded with attractive returns.
Victim of Tax Loss Harvesting
According to Morgan Stanley (NYSE:MS), there are 81 companies that will have technical pressures due to tax loss selling in Q4 of 2023, and EWBC is among those named. However, this could be a great opportunity for savvy investors who are looking for a bargain.
EWBC is trading at a low valuation compared to its past, with a P/E ratio of 5.8 compared to its 10-year median P/E of 13.8, as well as a price-to-book ratio of 1.13, lower than its 10-year median multiple of 1.83. It also pays a healthy dividend of…
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