This Maryland-based bank has seen a turnaround since the recession and insiders are loading up on its shares.
First United Corporation (FUNC 9)
From Contra the Heard
While a number of our additions over the past few years have been stocks with huge trading volumes and capitalizations, First United Corporation (FUNC) is at the other end of the spectrum, towards the minimum combo of trading volume and price.
As you likely know, unless you are a newbie to Contra, we do not believe in market orders, only limit orders. This way one knows exactly how much will be paid. That is of particular relevance with stocks that have low trading volumes. Therefore while we always believe that patience is wise when investing, it is even more important when trying to obtain positions like this one.
FUNC was founded in 1900 and struggled during the recession, but unlike many others in the sector, it maintained its common share count at a low 6.2 million. Meanwhile, the handsome quarterly dividend of $0.20 per share was eliminated and red ink landscaped the bottom line. It did return to profitability in 2011, and insiders have been acquiring shares, currently just shy of 6% of the corporation.
The capitalization ratios are good, book value is $11.49 and the company has the same old management, which seems like a positive thing.
Given the profitability and modest share count, there is an excellent chance that a dividend will be offered in the next couple of years. If that comes to pass, it should help boost the share price. My initial Sell Target is $21.24.
Benj Gallander, Contra the Heard Investment Letter, www.contratheheard.com, 416-410-4431, June 18, 2014