These are cheap, that is, in the Benjamin Graham sense of the word. It’s not that the price at the market is low but that right now these 5 banks are trading at less than book value. Among other things.
That none of them show any long-term debt is possible added value — a business that owes nothing typically stands a better chance of making it through tough times. A better chance, for sure, than those with more debt than equity.
Each of these banks is paying a dividend that yields in excess of 3%. How long they can continue to do so might be a question, especially considering the spectacular effects on the economy of the pandemic.
Nonetheless, again, since no debt is owed, a good MBA student might guess that dividends cuts could be less likely. It also might be the case that economics of the situation eventually require such cuts — no guarantees exist in the stock market.
It’s a decent bet that these names are beginning to show up on the “value” screens of hedge funds, large financial institutions and any individual investor familiar with the classic investment work of Professor Graham.
First Hawaiian Bank, based in Honolulu, is NASDAQ
With a price/earnings ratio of 8.9 and trading at a 16% discount from book, the stock might be making value lists. The bank is paying a 6.1% dividend — whether that can be sustained would be a concern given global economic issues.
LCNB National is a NASDAQ stock with headquarters in Lebanon, Ohio.
The light volume in this stock — average daily volume of 27,000 shares — makes it an unlikely candidate for big hedge funds and large institutions. Nonetheless, that it’s available at a 26% discount from book value makes it a possible value candidate for individuals. The p/e is 8.93. The dividend is 5.52%.
Mackinak Financial is another NASDAQ traded bank — this one based in Manistique, Michigan.
This stock is lightly traded with an average daily volume of just 23,ooo shares. This makes it an unlikely candidate for large institutions who need greater liquidity to get in and out without affecting price too much. Mackinac is trading at 61% of book. The price/earnings ratio is 7.45. It’s a 5.84% dividend.
The price/earnings ratio of this bank is 9. It’s trading at a 2% discount from book. The dividend yield is 3.44%. Like the others listed here, Washington Federal has no long-term debt.
Waterstone Financial is a NASDAQ traded bank based in Wisconsin.
Now available for purchase at an 8% discount to its book value, the stock’s price/earnings ratio of 10 is much lower than that of the market as a whole. At this price, Waterstone’s dividend comes to 3.34%.
These are not buy recommendations. Those pursuing research for value stocks as an investment process are likely to be regarding the banks with some interest, that’s all. The potential for great volatility in markets continues to exist and no certainty about risk or lack of risk is possible.
Stats courtesy of FinViz.com.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.
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