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A Bank Worth Your Money
10/31/2012 10:45 am EST
Here is a banking stock that is in prime position for a nice move at a good time to take advantage of a rare opportunity in the financials sector, says Mark Skousen of Hedge Fund Trader.
The Federal Reserve is pulling out all the stops to reignite inflation and avert recession. The money supply (M2) is growing at a 9% clip. In the short term, stocks and commodities should benefit, despite the recent sell-off. Corporate earnings are clearly slowly down, hence the Fed’s action.
Several commentators have noted that the stock market has not come up during the presidential debates, even though it has doubled under Obama’s reign. In reality, the rally on Wall Street has more to do with Ben Bernanke and the Fed than who is in the White House.
How are we doing in Hedge Fund Trader? E-Trade Financial (ETFC) reported worse than expected third-quarter earnings last week, and the stock hit our stop, giving us a slight profit in both the stock and the options. It just goes to show you how important our discipline is in maintaining and raising our stop orders.
That gives us profits in nine of our last ten trades. Where to invest the proceeds?
Financial institutions are benefiting tremendously from the Fed’s never-ending “quantitative easing” and cheap loans. One bank that is doing is well since the 2008 crisis is Chicago-based PrivateBancorp (PVTB), which caters to the personal banking needs of wealthy business clients and their families.
Founded in 1989 by Ralph Mandell, Private Bank has 34 offices in the Midwest, mostly in Chicago, with $13.3 billion in assets and a healthy wealth management facility.
Revenues and earnings are rising rapidly. Profits rose 71% in the most recent year to $52 million, on $435 million in revenues. With a profit margin of 15% and growing, the stock is still relatively cheap, selling for only 13 times next year’s estimated earnings, and only a buck over book value ($15.50 per share).
It’s also viewed as a bargain by Director James Bruce Nicholson, who two weeks ago invested $102,360 into 6,000 shares of PVTB, at a cost per share of $17.
Let’s buy Private Bancorp and set a stop price of $13 a share. For those more adventuresome, consider buying the March $17.50 calls.