Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (24975)	10/11/2006 4:43:11 PM
From: E_K_S	Read Replies (2) \| Respond to of 78717

Hi Paul - I also am heavy weighted in oil stocks. My next largest holding is in natural resource stocks. Both sectors have done quite well this last cycle. The average dividend yield to my portfolio from these two sectors is around 6% based on my average cost. I can peel off some of my shares, pay a long term capital gains tax and put this money into a basket of regional banks but I would be giving up my high net dividend income. I like the long term value these companies provide, so I believe I will continue to hold these shares and add new money to special "value" situations (like COP). My next largest holdings are in the finance sector w/ both large money banks (C & WM) and regional banks (NYB). I am thinking of adding a few more regionals to the mix. Many of the regional banks pay a pretty good dividend that provides a good source of qualified dividend income to the portfolio. Regionals are also candidates for a buyout from the larger money banks which adds a good kicker to the portfolio if you happen to own one. I see you like FNLC. What other regionals do you own or are on your watch list that (1) pay a good dividend, (2) have an excellent "regional" franchise that a money center bank may find a good fit as a buyout candidate and (3) has significant value when measured by the relative BV (excluding goodwill). I think Spekulatius makes a good observation when he states that many of the regionals present bargains for the value investor as the "efficient" market theory may not be pricing these banks at fair value. I believe at this point in the cycle (interest rates have peaked and the next move may be down), the money center banks may be poised to begin another round of buyouts and/or mergers. JPM is rumored to be looking to acquire another "large" bank or special regional franchise. WM was mentioned but perhaps some regionals might be in the offering too. EKS

To: Paul Senior who wrote (24975)	10/12/2006 12:36:06 AM
From: Spekulatius	Read Replies (5) \| Respond to of 78717

Community bank - EPIK, FNLC, CPBK - Announcing my 3rd buy today CPBK - a community bank in SC. Somewhat mediocre rentability but also pretty decent loan and asset growth over the years. Stock buyback and dividends are positives as well. Demographics in this part of SC are not that great however. Thinly trading does not bother me much, indeed I see it as an opportunity to get in at a bargain price ( I did buy at the low today). Dead money does not bother me much either as long as i believe the intrinsic value of the stock has increased (Deposit and loan growth, book value and earnings increases etc.) - it just means the stock is a better value now than it was before. I do prefer to buy in coastal areas as i believe that strong real estate and income growth is key for prospering banks (note that CPBK is an exception from the rule). I am a bit more partial on the efficiency ratio and to a lesser degree ROA. Why? Because an inefficiently run banks with an other wise intact franchise are prime takeover targets. Smaller banks tend to have efficiency ratios in the 60-65% range while bigger banks run below 50%. This means that buy taking over a small bank with let's say a PE of 12 (or PE of 15 after paying a 25% premium) is a good deal if they can get the efficiency ratio back to less than 50% (equivalent to a 30% earnings increase). So i think because of the slower growth but still good profitability small community banks with an intact franchise and trading at a decent valuation are a prime acquisition target, which should provide a floor to those stocks.