Small bank specialist Doug Hughes and value investor Richard Young both see takeover potential in regional banks. Ken Kam's gurus at Marketocracy look to Cleveland banks. Meanwhile, Richard Band sees opportunity in the country's biggest banking operation.
"Kaiser Federal Bancorp (KFED
NASDAQ) is a mutual holding company which
just sold 5.6 million shares of common stock at $10.00 per share in a subscription
offering. The stock opened at $14 and has headed south ever since, along with
most bank stocks over the past few weeks. Kaiser has earned a 5-star superior rating
for 40 straight years. They have four locations in Los Angeles, San Diego, and
Santa Clara counties and have served this market for over 50 years. Trading at 1.70 times
book for a MHC, is cheap, especially for the strong markets they are
in. Their asset quality is near perfect and reserves are very strong and total
assets are $448 million. Look for strong earnings growth for several years and a sale of
the bank in four-five years at $26-$29+ a share. The bottom line is that they
are in the right markets where there is plenty of growth and the recent market sell-off
has given us all a chance to get in, at a fair price. Accumulate under $11.50
and buy all you can under $11. Downside should be limited to around $10.50 a
share."
"Looking at the
possibilities for long-term compounding, my one of the best-positioned
industries for the next decade is the small- and medium-size bank group," says
Richard Young, editor of Intelligent
Investing
. "I'm
very enthusiastic about this sector. The number of banks is going to continue
to decline over the coming decade. Takeovers will be rampant and most at
premium prices. I have added two new banks to my list-
"Despite the backdrop of rising
rates, the last top two buys from the m100-the
top performing investors among the 50,000 monitored by Marketocracy--
are financials: Cleveland-based KeyCorp (KEY NYSE) and Charter One Financial (CF NYSE),"
says Ken Kam , manager of the Masters 100
Fund. "In April, KeyCorp, which offers consumer and corporate banking, said its
first-quarter earnings were 59 cents per share, up 15.2% from the year before
and ahead of the average analyst expectation of 53 cents. With a p/e of 13.59
and a 1.77 price-to-book ratio, the gurus liked the value. Charter One isn't as
cheap as KeyCorp, but it did raise its quarterly dividend to 29 cents per share
from 26 cents two weeks ago. And the company needed it, after missing
first-quarter earnings expectations of 69 cents per share with a figure of 22
cents. Charter One said, however, that the low number reflected an 'unusual'
debt prepayment charge and that it otherwise would have earned 71 cents per
share. Regardless, it closed April 7.3% lower than it opened the
month."
Meanwhile, Richard Band,
editor of Profitable Investing ,
suggests a large-cap banking issue. He says, "If coming rate hikes aren't about to wreck
the economy, it stands to reason that some of the best stocks to buy right now
are those that have been knocked down by exaggerated fear
