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Cullen/Frost Bankers (NYSE:CFR) (53.85, $3.16 bln) is a bank you can own and still sleep at night without worrying about what you might find out the next morning. While I am not sure it needs to be owned unless you have to have some exposure to Financials, it is still likely to perform reasonably well. I bought CFR right at the end of 2007 and added on the dip, but I also added recently after the stock popped following the Q4 earnings release.

CFR, based in San Antonio, is run by extremely conservative management. Fee income is significant due to its large asset management business, and the company exited the mortgage market years ago. You won’t hear about CDO write-downs either. The company operates only in Texas, which is one of the few states that is still showing population growth, job growth and relatively stable housing markets. Its large out-of-state competition is most likely to be in the retrenchment road, and the bank has plenty of excess capital. While the valuation metrics aren’t rock-bottom, they are still relatively low for the company:

I expect that the company will move to an all-time high this year, gaining a valuation of 16X 2009 estimates or about 64. 18% isn’t so shabby for a bank, as most banks will likely struggle with continued asset write-downs as well as the need to raise more capital. Historically, many have expected that this solid regional bank might be acquired by someone looking to enter Texas, but that seems unlikely at this time.

Disclosure: Author has a long position in CFR

Source: Cullen/Frost: A Bank for Turbulent Times