Posted by: MonsterMortgage.ca
Home Capital Group made headlines earlier this year as party in an investigation by the Ontario Securities Commission, the central target of a boisterous short-seller and the subject of massive withdrawals from high-interest savings accounts (HISAs) and guaranteed investment certificates (GICs) through Oaken Financial.
Understandably, many Canadian homeowners quickly grew familiar with the Home Capital Group name as there was no shortage of headlines each day from media outlets describing the troubles ailing the financial institution. The hysteria surrounding the Home Trust name spurred some phone calls from concerned homeowners to MonsterMortgage.ca – our advice was simple – just keep paying your mortgage. (See below for video.)
In late June, the new board of directors announced that the largest and smartest investor in the world, Warren Buffet of Berkshire Hathaway, has invested in Home Capital Group stock and will own approximately 40% of the company. Berkshire Hathaway has also put into place a loan facility that offers Home Capital Group enough financing to comfortably back the company’s operations and solidifies their ability to loan money again to Canadians and into the real estate market. The loan facility offered by Berkshire Hathaway is significantly less expensive than the financing the company had previously. Furthermore, this deal backs Home Capital Group with the confidence of Berkshire Hathaway – a corporation with $600+ billion dollars in assets.
Clearly, Buffett likes this business and he likes Home Capital Group – enough to purchase up to 38% of the company pending approval by shareholders later this year. Investors liked this deal as well as it pushed up the stock price from a low of $6.00 to its current level of ~$15.00. Most importantly, individual Canadians have once again begun to purchase Home Capital’s Guaranteed Investment Certificates (GICs) which is the lifeline of their mortgage business. We continue to support Home Trust as they perform a critical role in the Toronto Mortgage market. As Warren Buffet stated in his folksy manner:
“There are many people that earn income in different ways that don’t qualify for traditional bank financing – my salary is $100,000 per year, I would not qualify for a mortgage if people didn’t look at my other earnings and think outside the box.”
And if you think Uncle Warren’s best investments are behind him – recall that Warren Buffett earned 12 Billion dollars in 2016.