Wall Street being a notoriously impatient place, it's not so surprising that turnaround stories are so often overlooked in their early stages - usually, turnaround plans involve a lot of near-term pain and execution risk with no certainty on that outcome. When they work, though, the rewards can be substantial.
Writing about Texas Capital Bancshares (TCBI) back in July (ahead of the company's September strategic update), I was cautious on the near-term valuation and outlook, but still bullish and I thought that there were solid arguments for long-term investors to stay put. The shares subsequently spent some time below $60 and are pretty much where they were when I last wrote, underperforming the banking sector by a noticeable amount.
My feelings haven't changed. I think CEO Holmes has put a good plan in place, and while there is execution risk, I think that's outweighed by the opportunities this restructuring will unlock. Higher spending may well keep a lid on the share price for a while longer, but I think the long-term return potential makes this a name to consider if you believe management is pursuing the right plan for the business.
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Texas Capital Bancshares: Love The Plan, But It Will Take Time
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