Bank on Hughes

01/09/2004 12:00 am EST


Doug Hughes


Doug Hughes,  new to our coverage in the Digest, is one of the most specialized advisors and money managers that we know, focusing exclusively on regional bank stocks. This expertise has been a boon to his followers, as the sector has been marked by takeovers and sharply rising valuations. Here's his favorite for 2004. 

"Citizens Holding (CIZ ASE) is the bank holding company for Citizens Bank of Philadelphia, Mississippi. They have a 50% market share in their main markets with 15 locations and over $575 million in assets. Loan growth is solid, but this should grow nicely in the coming years with a new casino with seven restaurants coming in, just a few miles away. Also, Nissan is building a new plant about 90 miles from them and this should create other over-lapping business in their markets. Asset quality is the best.  Their net interest margins are strong and they just increased their cash dividend now at a 3.20% yield. Look for earnings of $1.55+ a share in 2004. Look for a sale of the Bank in 2004 at around $25 a share or a 30%+ premium to today's trading price. Their book value is $11.20 a share and return on assets at a strong 1.27%. Accumulate now under $19.5 and look for a sale of the bank within one-two years for a 30%+ return. Someone will want to pay for this market."

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