There has been a rush of takeover activity in the banking sector, particularly among regional banks. Three leading investment advisors-Chuck Carlson, Nancy Zambell, and Doug Hughes -each offer their "banking bets" to play this trend.
(For more information on the advisors below, please click in their photos.)
"Investors should never buy a stock solely on
takeover speculation," says Chuck Carlson, editor of The DRIP Investor.
"Better to find solid, fundamentally sound companies in industries where
takeover activity has been heating up. Banco Popular (BPOP NASDAQ) offers an interesting takeover
play. Banco Popular focuses on providing banking services in Hispanic
communities in the US and Puerto Rico. This fast-growing ethnic group offers an
interesting growth niche for banks. Aside from takeover appeal, Popular has much
to like. Profits have shown steady growth over the years, and record profits are
expected in 2004. I own the stock and remain bullish on its prospects.
Synovus Financial (SNV NYSE) offers an interesting takeover play in two markets.
First, the firm is a holding company for 41 community banks located in Georgia,
Alabama, Florida, Tennessee, and South Carolina. Second, it has an 81% stake in
Total System Services, a leading bankcard processor. This business has been the
biggest driver of growth over the years and is one reason these shares sell at a
premium to most banks. The stock offers ample long-term potential for patient
investors."
"We are on the cusp of
merger mania and one of the first industries to participate is the financial
segment," says Nancy Zambell, editor of UnDiscovered Stocks . "But many of
the larger deals have already occurred. The time is ripe for mergers and one we
think has an excellent chance of becoming a takeover is Huntington
Bancshares (HBAN NASDAQ). "The bank has proven itself a true
survivor through its 137-year history. It is now a $30 billion regional banking
powerhouse with branches in Ohio, West Virginia, Michigan, Indiana, and
Kentucky. Right now, the shares are trading 25% lower than its peers, and its
price/book is 2.3. Many of the current mergers are paying upwards of three times
book value, so the opportunity for a takeover premium is high. In the meantime,
you can sit back and enjoy a 3% dividend yield, which was increased 9.4% in
2003. In addition, the stock is undiscovered. Institutional ownership is just
37% and only a few big company analysts cover the stock. Buy up to $25 and keep
a mental stop loss of 20% less than your entry price."
GB&T Bancshares (GBTB NASDAQ)
is the latest featured recommendation from Doug Hughes,
editor of The Small Bank
Newsletter. "GB&T is a multi-bank holding company comprised
of five Georgia community banks with $945 million in assets. This bank is
growing very fast, and they are doing many small acquisitions themselves. Their
earnings are increasing even with all the new shares from all deals they are
doing. Asset quality is very strong and getting better. Reserves, loan growth,
and net interest margins are strong, and their book value is over $14 a share.
They keep increasing their cash dividend. The bank should earn $1.75 in 2004 and
with a 70% efficiency ratio, there is room for earnings growth once these
acquisitions take hold. This bank could be worth $30 a share if someone were
going to take them out, which could happen within one-two years, as they are in
all the high growth markets that other banks may want. Accumulate under $25 and
buy all you can under $24. Downside should be limited to about 5% in this
market."
