JakilaTheHun's CAPS Blog

Diving into Commerical Banks, Part I: HMPR

Over the past few months, the market has climbed upwards relatively quickly, which has eliminated a lot of the deep bargains available.  There are still some great deals out there and I’ve been fortunate enough to discover a few, but it’s become much more difficult to find stocks with the highly favorable risk-reward balances we saw earlier this year.

One sector where I believe huge opportunities have opened up is small commercial banks.  These are not the Banks of America (BAC), the Citigroups (C), or even large regional players like SunTrust (STI) and Regions Financial (RF).  Rather, these are often community banks or small regional banks that may operate in a few metropolitan areas. 

There is an unbelievable amount of bearish sentiment in regards to these banks due to the fact that (a) the government is not going to pull out all stops to save them like their “too big to fail” peers, (b) the FDIC seems to shut down another obscure commercial bank every Friday, and (c) these banks are less closely followed by the investing masses.  Essentially, investors are scared out of their pants at the mere thought of owning a small commercial bank, so few bother to research them, but that’s why there’s great opportunity in the sector.

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