This Northeastern bank has had some nice appreciation, but the shares still look attractive for growth in the New Year.
First United Corporation (FUNC)
From Contra the Heard
First United (FUNC) has had a wonderful run since it was chosen last year, up about 19%. From this vantage point, it appears that it could double from here. This bank was founded in 1900 and has a deep relationship with its community. The bank struggled during the recession, but unlike many others in the sector, it did not raise capital and 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 returned to profitability in 2011. Insiders own about 6.5%.
The capitalization ratios are strong; the book value is over $13.50, far surpassing the current stock price of $10 or so. The debt load remains modest and the company has the same old management, which seems like a strong positive.
Given the profitability and lowly share count, there is an excellent chance that a dividend will be implemented in the next couple of years. If that comes to pass, it should boost the share price. Our initial sell target on this one is $21.24.
Benj Gallander, Contra the Heard Investment Letter, www.contratheheard.com, 416-410-4431, December 22, 2015