For his 2-for-1 Newsletter, editor Neil Macneale focuses on buying stocks that have announced stock splits. His portfolio has shown an 896% overall return over the past 22 years — an 11% annualized rate relative to the overall market's return of 6.4%.

For about a year now I have been expecting some “black swan” event to emerge and push the market over the brink and into a severe correction. And for almost that long, our portfolio has been hitting new highs on a fairly regular basis.

Despite these market worries, we maintain a fully invested portfolio and our latest new buy recommendation is First Defiance Financial (FDEF), which announced a 2 for 1 split on June 22.

I initially considered this stock as a recommendation last month — but saw a 6% increase in the stock price in the week or so following the announcement.

I thought the price too rich for my taste at the time, but it has since dropped back to about where it was just before the announcement and I’m going to be adding it to the model portfolio.

First Defiance is a holding company for a community banking and insurance operation serving Northern Ohio, southeast Michigan, and northeast Indiana. This is a small cap ($650M) company incorporated in 1995 in Defiance, Ohio.

Since then, and especially over the last ten years, FDEF has grown steadily and has become, in my opinion, a great example of the opportunity for success that exists in the small, locally focused, community banking space.

First Defiance has good valuation numbers, with a PE of 17.9 and a price-to-book of 1.48, both far lower than average for its peers. Its profit margin and balance sheet are very healthy.

The current dividend yield is 2.14% after an increase for the latest quarter. The record date for the latest dividend was today, so you won’t be collecting a dividend for another three months.

That also means the price of the stock may drop a little in the next few days, so you needn’t be in any hurry to put in your order.

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