Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Wisdom

The Most Hyped Stock in America: Bank of Internet

Bank of Internet or BofI Holding Inc. (NASDAQ: BOFI) is both the most hyped stock in America and possibly the worst financial stock.

Some investors and the alleged editors at The Motley Fool continue to love BofI; even though it and Chief Executive Officer Gregory Garrabrants have been investigated for money laundering, The New York Post reported. The bank has also been accused of questionable mortgage lending and sued by some of its investors

Despite that, the Motley Fool continues to run articles that claim Bank of Internet is growing like a weed and somehow a threat to big monster banks like JPMorgan Chase (NYSE: JPM). The latest example of such drivel is this loathsome hype piece by Matthew Frankel who calls himself the “TMF Math Guy.”

One has to wonder if Frankel is paying attention or simply on BofI’s payroll. One thing is certain the TMF Math Guy has not been looking at financial numbers.

BofI vs the Big Monster Banks

A glance at financial numbers exposes the claim the notion that Bank of Internet is a threat to Monster Banks as a bad joke. To see how big a joke the Motley Fool really is we will compare BofI’s numbers to some monster banks in some important categories.

Revenues for 4th Quarter 2017:

  • BofI Holding Inc.: $97.31 million.
  • JPMorgan Chase & Co: $24.153 billion.

Gross Profit for 4th Quarter 2017

  • BofI Holding Inc.: $97.31 million.
  • JPMorgan Chase & Company: $24.153 billion.

Net Income for 4th Quarter 2017:

  • BofI Holdings Inc.: $31.58 million.
  • Bank of America Corporation (NYSE: BAC): $2.52 billion.

Operating Income for 4th Quarter 2017:

  • BofI Holdings Inc.: $56.5 million.
  • Bank of America: $7.406 billion.

Cash and Equivalents 4th Quarter 2017

  • BofI Holdings Inc.: $618.9 million.
  • Wells Fargo & Company (NYSE: WFC): $295.972 billion.

Total Assets 4th Quarter 2017

  • BofI Holdings Inc.: $8.915 billion.
  • Wells Fargo & Company: $1.952 trillion.

The actual financial numbers show us that Bank of Internet is not a treat to the monster banks. Judging by the actual financial numbers BofI is not even a blip on their radar.

Is BofI a Good Investment?

Some value investors might say that the bad news would make BofI a good investment but is it. The answer is no when one compares it to the monster banks.

BofI shares were trading at $39.72 on 5 March 2018, but Wells Fargo was trading at $57.88 and Bank of America or BOA was trading at $32.29 on the same day. BOA was actually cheaper than BoFI and it generated an operating income of more than $7 billion during 4th Quarter 2017.

Despite the Motley Fool hype, the monster banks are still the value in financial stocks. They are generating vast amounts of cash, and it appears that next-generation financial solutions like BofI are not a direct threat to them.

Not even a 39¢ dividend paid on 15 February 2018 makes Bank of Internet a good investment. That was higher than Bank of America’s 12¢ dividend paid on 31 January 2018, but it raises a troubling question where is BofI getting the money to pay the dividend? Borrowing? Are funds that should be spent on things like anti-fraud and anti-money laundering measures being spent on the dividend?


One has to wonder because Wells Fargo paid a 39¢ dividend on 1 March 2018. Those seeking a dividend paying bank would be better off with JPMorgan Chase which paid a 56¢ dividend on 5 January 2018.

Bank of Internet is a Terrible Investment

If you are looking for an income stock that’s likely to be around a few years from now Chase, BoA, and Wells Fargo would be far better investments. It will be a miracle if Bank of Internet is around next year.

Those seeking a next-generation financial solution would be better served by PayPal Holdings (NASDAQ: PYPL). PayPal reported assets of $32.65 billion, $13.047 billion in cash and short-term investments, revenues of $3.744 billion, a net income of $620 million, and a gross profit of $2.072 million for 4th Quarter 2017.

The real success in next-generation financial technology is bank alternatives like PayPal not Bank of Internet. Smart investors should stay as far away from BofI as possible.

It would also be a good idea for investors to ignore The Motley Fool. There seems to be something really wrong with some of the financial advice it is dispensing. The real fools seem to be the ones buying BofI stock.