Older portfolios of bank stocks are currently carrying about a 20% to 25% cash level.
Most of the small banks that I want to buy are flirting with the upper end of the buy range, and I am trying to exercise some patience about getting fully invested. If we get a severe market pullback that creates additional values, I will be fully invested and would even consider using a small amount of leverage to increase my stake in small banks. I have a very high degree of conviction on this group for the next five years and beyond, and I am confident that it will eventually fund my beach house.
There are a few stocks that you can buy if you do not already own them to get established in the trade of the decade. I am not going to break a lot of new ground here, but let me give a quick rundown of stocks that are large enough to discuss and can be purchased right now regardless of market opinions or concerns.
HopFed Bancorp (HFBC) remains a strong selection in the small bank space. The bank is located in western Kentucky and middle Tennessee and has recently moved to acquire another smaller bank in the region to expand further. Given the low returns at HopFed, the proposed acquisition has attracted the ire of noted bank stock activist Joseph Stilwell, who owns about 7.5% of the bank. Other activists also hold smaller positions, so pressure is going to be on the bank to perform well sooner rather than later. At 80% of tangible book value, the stock is cheap and can be bought at this level.
MutualFirst Financial (MFSF) is another cheap bank stock that has attracted the presence of activist investors. The company reported earnings a little over a week ago and showed improvements in earnings, return on assets as well as credit quality. There has been a lot of takeover activity in the Muncie area of late, and I am not going to be shocked by a takeover with this bank. The stock is cheap at 80% of tangible book value.
Northfield Bancorp (NFBK) of Staten Island, N.Y., completed its second-stage mutual conversion process back in January. The bank is cheap, trading at just 90% of tangible book value, and is awash in cash after raising $356 million in the conversion offering. Simplicity Bancorp (SMPL) in the Los Angeles area is still a buy at a little less than 90% of tangible book value. So is Cape Bancorp (CBNJ) in New Jersey at 85% of book value.
Most of the banks that qualify for immediate purchase in a trade-of-the-decade portfolio are under $50 million in market cap right now. The larger smaller banks have been bid up somewhat with the overall market. Right now, I find myself hoping that my caution is rewarded and we get a strong selloff. There are more than 250 banks currently trading between 90% and 125% of tangible book value, and a decent decline in stock prices would create a bank stock buying bonanza.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider HFBC, MFSF, SMPL and CBNJ to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Most of the small banks that I want to buy are flirting with the upper end of the buy range, and I am trying to exercise some patience about getting fully invested. If we get a severe market pullback that creates additional values, I will be fully invested and would even consider using a small amount of leverage to increase my stake in small banks. I have a very high degree of conviction on this group for the next five years and beyond, and I am confident that it will eventually fund my beach house.
There are a few stocks that you can buy if you do not already own them to get established in the trade of the decade. I am not going to break a lot of new ground here, but let me give a quick rundown of stocks that are large enough to discuss and can be purchased right now regardless of market opinions or concerns.
HopFed Bancorp (HFBC) remains a strong selection in the small bank space. The bank is located in western Kentucky and middle Tennessee and has recently moved to acquire another smaller bank in the region to expand further. Given the low returns at HopFed, the proposed acquisition has attracted the ire of noted bank stock activist Joseph Stilwell, who owns about 7.5% of the bank. Other activists also hold smaller positions, so pressure is going to be on the bank to perform well sooner rather than later. At 80% of tangible book value, the stock is cheap and can be bought at this level.
MutualFirst Financial (MFSF) is another cheap bank stock that has attracted the presence of activist investors. The company reported earnings a little over a week ago and showed improvements in earnings, return on assets as well as credit quality. There has been a lot of takeover activity in the Muncie area of late, and I am not going to be shocked by a takeover with this bank. The stock is cheap at 80% of tangible book value.
Northfield Bancorp (NFBK) of Staten Island, N.Y., completed its second-stage mutual conversion process back in January. The bank is cheap, trading at just 90% of tangible book value, and is awash in cash after raising $356 million in the conversion offering. Simplicity Bancorp (SMPL) in the Los Angeles area is still a buy at a little less than 90% of tangible book value. So is Cape Bancorp (CBNJ) in New Jersey at 85% of book value.
Most of the banks that qualify for immediate purchase in a trade-of-the-decade portfolio are under $50 million in market cap right now. The larger smaller banks have been bid up somewhat with the overall market. Right now, I find myself hoping that my caution is rewarded and we get a strong selloff. There are more than 250 banks currently trading between 90% and 125% of tangible book value, and a decent decline in stock prices would create a bank stock buying bonanza.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider HFBC, MFSF, SMPL and CBNJ to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
