Our first idea today is taking advantage of the low-P/E bank stocks, and our second idea is a sell recommendation.
Buy: Best Hometown Bancorp, Inc. (BTHT)
From Hughes Investment Management
More and more deals today Blue Valley Ban Corp. (BVBC) taken over by Heartland Financial USA, Inc. (HTLF) for a 25% premium. It’s a great price for BVBC, almost 1.75 times book and the CEO is almost 70.
Deals will happen each week now for the next several years. New banks just cannot make any money, so the only way to grow will be buying older banks at fair prices.
Many small banks are still trading way under book, and many larger names have jumped back 15-20% in the past few weeks. This will lead to the biggest wave of deals since 2001.
For those who are not adding huge capital at this time, it will be a mistake.
As well, “shorting” ideas will keep coming up now with the huge snapback, and we will be prudent in putting on hedges from time to time. But right now, the game is going long—many small names, heavy, and just waiting; the same as we usually do.
We are adding Best Hometown Bancorp, Inc. (BTHT) heavy under $11.00.
Asset quality is still as good as it gets, and banks are buying back shares like crazy—even small names like Quaint Oak Bancorp, Inc. (QNTO) have large buybacks in place that they will use once earnings are out this month. “Blackout periods creative great opportunities for good investors.”
This is a great time, to go very long—small names.
Douglas Hughes, Hughes Investment Management, www.banknewsletter.com, 888-814-7575, January 17, 2019
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