Five Reasons To Like Temecula Valley Bank

A lot of my portfolio is in undervalued closed end funds now, but to make things more interesting I thought I would blog about a stock today.

I found a cheap, beaten down bank stock and bought some shares today. Temecula Valley Bank (TMCV) is based in California and specializes in guaranteed SBA loans. SBA lending can do well even in a weak economy and usually thrives in a low interest rate environment. I also think the bank has a pretty cool name.

Here are some things I like about TMCV:

1. High return on equity (18.46%).
2. Low price to book value (around 1.0)
3. No subprime or alt-A exposure.
4. Forward PE ratio= under 6
5. Depressed by tax loss selling.

Mr. Market seems to be over-estimating the credit risk here, and tax loss selling is adding to the mix. I bought two lots in the 10.60 range, but I think anything under 11 is a good value.

Comments

[Jamie:]

Do you know where Temecula is and who they do loan money to? The bank may be oversold, but I think it's important not to undersell the risk here. The Inland Empire has some of the fastest falling real estate prices in the US and one of the highest bankruptcy rates.

2007 Dec 04 11:35 AM

[User 300890:]

I wonder what this person thinks of tmcv now.

2008 Nov 18 05:11 PM