First United Corporation (FUNC) — our top conservative idea for the coming year — is based in Oakland, Maryland with 25 locations in Maryland and West Virginia, notes Benj Gallander, value investor and editor of Contra the Heard Investment Letter.

Established in 1900, this enterprise got beaten up like most banks during the recession but has been profitable since 2011 with the bottom line almost tripling last year to $1.51 a share.

The first three quarters this year have been even better with EPS at $1.50 already, while touching $0.63 this past quarter. The rising earnings led to a dividend jump from $0.09 to $0.13 this past quarter to boot Prior to the recession it was as high as $0.20.

While another dividend increase this year is not expected, one could easily be in the offing before the end of 2021. Strong capitalization ratios should help to support this too.

There is a current wild card in activist investors Driver Management and Rangeley Capital, have been looking to get their members on the board while pushing for a sale of the organization. They opine that the company could fetch between $26 and $33 a share, a reasonable premium to the current trading value.

Insiders continue to believe there is upside too, demonstrated in particular by the recent purchases by Chairman/Pres/CEO Carissa Rodeheaver, bringing insider holdings to about 4.25 percent. Given that there is just north of seven million shares, it would not take a lot of money for an acquisition by a bigger player. 

Our purchase price averaged $8.44 so between capital appreciation and dividends, our return has been fantastic. More is expected.

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