I have written a lot about the banks. They were clear contrarian buys after the Eurozone crisis. But after rising strongly through 2012 and 2013, this year they have been treading water or falling.
Although I still believe in the investing merits of Barclays and Lloyds — and recent falls mean that they currently look particularly cheap — I suspect they were overdue a correction.
Although I have invested in both of these banks, my biggest investment in the banks has actually been a small cap which you may not have even heard of.
The best performing bank of the past year
This happens to be the best-performing bank of the past year. In fact, come to think of it, it is currently my best-performing recent investment, full stop.
Although it is a FTSE 250 company, its business is carried out overseas, in a relatively unknown frontier market.
Which bank am I talking about? Well, the company in question is Bank of Georgia (LSE: BGEO).
Eastern European states such as Georgia have largely been outshone by the growth of China and the BRICs, as they are relatively small economies which have been in the looming shadow of Russia. But Georgia’s reformed and modern economy is now one of the fastest growing in Europe. I rate it alongside emerging and frontier markets such as Turkey, South Africa and Mexico.
And, crucially for investors, Bank of Georgia is a business which is in rude health, and has been growing like topsy. To be honest, I wish that every investment I made went as smoothly as my story with Bank of Georgia.
I wish every investment went as smoothly as this
I bought in early in 2013, at 1470p. When I spotted the company, I could tell that this was a company which was clearly, and substantially undervalued, with a single-figure P/E ratio and year-on-year earnings-per-share growth of 10-20%.
The market seemed to wake up to how cheap these shares at about the same time I did, and the shares started rising. Earlier this year the share price reached 2500p. Just the other week I sold for a cool 70% return after just over a year.
This is the closest I think I have ever got to the perfect investment. This is a play where everything went right. You have these investments from time to time, when you buy at exactly right time, and sell at exactly the right time.
Believe me, it won’t always happen like this, but when it does, it’s worth taking a moment to savour it.
I still think Bank of Georgia is a strong long-term investment, with a 2014 P/E ratio of 10, falling to 8 in 2015. If the share price falls, it might just be worth buying in again.
