What Makes Bread Financial (BFH) an Attractive Stock?

Market Overview - The market rebound that began in April continued into the third quarter of 2025, with growth and momentum stocks delivering double-digit returns [1] - Small and micro-cap value stocks achieved their best quarterly returns since Q4 2023 [1] Deep Value Strategy Performance - The Deep Value strategy appreciated by +26.50% in Q3 2025, outperforming the S&P 1500 Value Index (+6.29%) and the S&P 600 Value Index (+11.71%) [1] - Year-to-date, the strategy's net returns are +9.20%, compared to +9.28% for the S&P 1500 Value Index and +3.17% for the S&P 600 Value Index [1] Company Highlight: Bread Financial Holdings, Inc. (NYSE:BFH) - Bread Financial Holdings, Inc. is a financial services company offering tech-forward payment and lending solutions, with a one-month return of 13.24% and a 52-week gain of 13.94% [2] - As of December 04, 2025, Bread Financial's stock closed at $72.00 per share, with a market capitalization of $3.29 billion [2] Performance and Transformation of Bread Financial Holdings, Inc. - Bread Financial was the only negative holding during the quarter, with a market share price down 2% [3] - The company has undergone a multi-year transformation to streamline its business model, enhance underwriting processes, and expand brand partnerships [3] - Since the beginning of the transformation in early 2020, capital ratios improved by more than 3x, debt was reduced by $2 billion, and direct-to-consumer deposits increased by over $6 billion [3] - Management has increased credit reserves to 13%, with delinquency rates at half of reserve levels, indicating potential for significant reserve release in the coming years [3] - The company aims for normalized ROTCE in the mid-20% range and normalized earnings above $15 per share, with shares trading at more than 25% normalized earnings yield [3]