Top Buys from a Small Cap Bank Expert

08/10/2018 5:00 am EST

Focus: FINANCIALS

Doug Hughes

Editor, BankNewsLetter.com

Smaller bank stock investing is about the safest sector you can find in today’s high-priced investing world, suggests Doug Hughes; the editor of Bank Newsletter specializes in small regional banks and financial firms.

We have been spotting small-cap takeover targets for over 30 years; we think the next on the block to be a takeout target is investment bank Oppenheimer Holdings (OPY).

The stock is worth $37.00 a share today on earnings and book value. Book value will grow by at least 10%  next year and get to about 33.00 a share. Breakup value has to be $45 to $50 a share today and growing. 

One thing I have learned the past 12 months is that when you blow away earnings numbers the stocks keep going up much more than you think possible and here you have a takeout candidate as well with the insiders always buying heavy stock and never selling.

They even bought back 450,000 shares — 3% of the stock — at under $16.00 in the past year, that’s a great buyback and use of capital. The CEO owns 30% so one day he will want to get paid — and he is over 70 now.

The investment bank almost went out of business in the 2009 crash but they didn’t and now they are reaping the rewards. We have 3 catalysts on this one — earnings growth, interest rates going higher than people think and the potential for a takeover

We have been adding to our position in Oritani Financial Corp. (ORIT). The regional bank has huge deposits of over $1.2 billion at their two main locations; they are located in some great Bergen County markets in north New Jersey, where a lot of money is. The bank has 26 locations in all the right towns.

They keep making money on all their deals, and their balance sheet is "rock solid” “and their operating performance "stellar” as stated by the President, Kevin Lynch.

We think investing in this bank is as safe as it gets; insiders again own a ton and they are very old. Meanwhile, the shares pay a 6% cash dividend which may be higher this year and as liquid a bank stock you can get that we follow. Load up; we see little downside risk here.

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