NEW YORK (
) -- As a major shareholder in
M&T Bank Corp.
boss Warren Buffett ought to know a thing or two about banking, so if he zigs when most investors are zagging, it makes sense to pay attention.
Berkshire's investment in
, disclosed in a filing late Monday, may be just such an instance.
Commonly held wisdom in banking these days is that there will be massive industry consolidation, as small banks struggle to survive in the new economic and regulatory environment. Buffett himself has talked about the overhang of commercial real estate loans on regional bank balance sheets that have yet to work their way through the system. Many believe that overhang will be one of the drivers of consolidation.
But Fiserv, a technology company that helps small banks with things like keeping track of information in deposit and checking accounts, would appear to benefit from increasing fragmentation in the industry, according to Brian Derman of payments consulting firm Glenbrook Partners. The logic is simple enough: the more banks there are out there, the more potential customers for Fiserv.
Perhaps Buffett believes expected consolidation in the banking industry has made Fiserv cheaper than it otherwise would be. The stock trades at just 16 times earnings, and has underperformed the S&P 500 over the past year.
And in many respects, boring businesses like Fiserv appear to be in vogue in the banking industry.
is placing lots of emphasis on international expansion of its transaction services business, and
has also identified this as a key objective. And Fiserv's main competitor,
was targeted by buyout firms
The Blackstone Group
Thomas H. Lee Partners
in May, according to widespread reports.
Fiserv is also trying to grow internationally, though Glenbrook's Derman says the company's fortunes and future remain very U.S.-oriented.
In short, Fiserv is the kind of boring, steady business Buffett loves, and it's hard to argue with it as a long term play. But it's also worth keeping an eye on future statements from Buffett to see if he thinks the U.S. banking industry may remain more fragmented than many observers are forecasting.
Written by Dan Freed in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.