One of my frequent sayings here on Seeking Alpha is that “buy the dip” is a great strategy complicated by the fact that the best businesses typically only see meaningful dips when something scary is happening. Such is the case with First Republic (FRC) – while the shares of what I believe to be one of the best-run banks out there are typically exceptionally expensive, the stock has pulled back meaningfully on worries related to unexpected management turnover.
I don’t believe the turnover is a sign of anything fundamentally wrong at First Republic, and I believe the board understands the basic idea of “if it’s not broken, don’t break it” when it comes to finding a new co-CEO candidate. Still, the risk of something more significant going on cannot be completely dismissed, and management turnover always carries the risk that new managers will, in fact, “break it”. Growth expectations are hardly low here, but if First Republic can generate double-digit long-term core earnings growth, the shares are definitely worth a look on this pullback.
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