14 Beaten-Up Financials That Now Offer Real Value

Top-down-oriented investors seem to have significant concerns about the macroeconomic backdrop right now. On the other hand, many value and bottom-up-oriented investors who were previously cautious on the market have either become more constructive on stocks or turned outright bullish. The list goes on: Warren Buffett, Jeremy Grantham, Ken Heebner, John Hussman, John Neff and return estimates based on the ValueLine Survey.

Putting my bottom-up investor’s hat on, I can sympathize with the bullish assessment. Just for fun I ran a quick screen of low-priced beaten-up financials with heavy insider buying and came up with a moderately sized list, which is shown below.

It’s easy to see how some of the bottom-up managers are behaving like kids in a candy store. You don't see these kinds of values every day. The P/Es of these financials are low and they have had significant insider buying in the last six months and no insider sales, which is an indication of management confidence.

In addition, other deep value screens are also showing long lists of stocks with good upside potential with solid asset value support.

(click to enlarge)

However, my inner top-down investor remains concerned that there is too much macro downside risk. The market is too dependent on policy response for me to sound the all-clear for the bulls.

Disclosure: I don’t have a position in any of these stocks. You should not consider this as a recommendation to trade any of them. You are responsible for your own portfolio and you should do your own homework.

Comments

[Jimmy Lathrop:]

As long as hedge funds, pension funds, investment banks and insurance companies are unloading securities to meet margin calls, investing in any one of these companies is a waste of money. There will be no positive earnings until home prices stabilize. The dividend has been slashed at all of these companies. Many insiders are exercising options because they have seen other companies get swallowed up by acquirers, making their options worthless, so the purchase by insiders probably has nothing to do with the health of the company. I strongly disagree with your claim that these stocks are value - they may be cheap, but that does not mean that they will have value in future, it means that they are crippled and should be avoided at all costs.

2008 Oct 26 10:32 AM

[PastTense:]

No one really knows how much toxic waste any bank truly has.

2008 Oct 26 10:33 AM

[Alex_G:]

All of these banks have their call reports avail on the FDIC.GOV site. Page 15 will tell you what they have in single fam construction and land loans. Then go and find out what housing and land prices have done in their footprint in the last 2 years. Do the math and see if they will make it or not.

2008 Oct 26 11:40 AM

[fatcat:]

These picks are for true bottom fishers with a death wish!!

2008 Oct 26 12:10 PM

[goldstriker:]

You are correct. Most of these financials have good balance and cash flow statements. But to jump in big time, may be a big mistake. The end is not in sight yet because of the "fear" factor and the panic stage that most are in. I'm just a small time day trader, and make money by "buy low - sell high" principle. Get in and out in one day and don't hold anything overnight-believe me, your sleep will be sweet.

2008 Oct 26 12:10 PM

[Dork:]

Have another hit off the crack pipe. CNB and CBON? Ever heard of resi real estate land and construction loans? TARP is not going to save all of them, look at NCC....

2008 Oct 26 05:03 PM

[mdmrjsds:]

The US mortgage market is about 12 trillion. Housing prices have declined about 20%. So 2.4 trillion in value loss.

The banks have written off 600 billion. The taxpayer has ponied up another trillion. Who will cover the other 500 billion to a trillion? And where is it?

Not getting into CDSs.

2008 Oct 26 05:04 PM

[User 265729:]

IMO any financial institution who takes money from the American taxpayer should be sold off far parts and their CEO's sent to the scrap heap.

How dare these people tout how strong and well positioned they were, then as soon as Paulson hands them the breast of the taxpayer dollars the start nursing.

Watch out! The mother's milk came from China.

2008 Oct 26 05:44 PM

[bsharvy:]

Looks like UCBH is the pick of the litter, based on a brief review. Anybody follow it?

2008 Oct 26 06:17 PM

[steveballmer:]

I'm staying away from financials from now on, going all tech!

2008 Oct 26 08:04 PM

[Dork:]

Regions is the survivor, or at least long enough to get acquired. UCBH is a longshot, lots of expsoure to Cali resi R.E construction, severity getting worse not better. Wouldnt touch CNB or UCBH even at these levels. While the Treasury backstop is a game changer, not everyone is going to get a seat at the table...stick with those that get the access to capital - i dont think CNB is on that list..

2008 Oct 26 08:08 PM

[fxtrader07:]

sorry, but this list is crap! After lehman#s collapse the financial world has changed rapidly for the worse.
I would not count on ANY insider purchases prior to Mid/End September! they were made in a different world following different assumptions.
and you will notice that aftef end of august hardly ANY insider bought a single share in the companies on your list.
go figure.

2008 Oct 27 05:16 AM

[biomedlives:]

I wouldn't buy FRGB or any other bank located in southern California right now.

2008 Oct 27 06:22 PM

[User 265729:]

Financials are all radioactive until proven otherwise.

That goes for just about any investment these days...

2008 Oct 27 10:33 PM

[Marcus Aure...:]

A lot of people mocked Cam back in July, when he said Oil would be at $100.00 before it would be $150.

2008 Oct 28 02:56 PM

[warriornasdaq:]

imperial cap bank has bottomed the chart of impc.pk has reversed the stock could goto $10 the cfo is working hard to fix the bank the rebound in the economy should help imperial return to profitability eom

Sep 29 04:04 AM

[warriornasdaq:]

impc chart has reversed looks like the worst is over book value $19.50 reported june 30 2009 time to buy, im loading impc eom

Sep 30 01:56 AM