3 Reasons To Buy The Pullback In This $6 Bank Stock

| About: Huntington Bancshares (HBAN)
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Just a few weeks ago, Huntington Bancshares, Inc. (NASDAQ:HBAN) were hitting new 52-week highs. The market weakness over concerns about the fiscal cliff has created a solid pullback in this and many other stocks. These are the types of declines that patient value investors look for before buying a stock. It is not unusual for a stock to decline while still remaining in a long-term uptrend, and there are signs that this could be the case for Huntington Bancshares. Here are three reasons why investors should consider buying the recent dip:

1. This stock was recently upgraded by FBR Capital from underperform to market perform, and the analyst raised the price target to $7.50 per share. With the stock trading at about $6, a move to $7.50 would provide investors with gains of about 25%.

2. Huntington Bancshares has been reporting solid financial results. For the third quarter of 2012, it announced net income of $167.8 million, up $15.1 million (or 10%) from $152.7 million in the prior quarter. This was equivalent to 19 cents per share in earnings, which was up 2 cents from the prior quarter. Net income in the year-ago quarter was $143.4 million, or 16 cents per share. The company saw steady growth in loans, deposits as well as new customer relationships.

3. The housing market has been showing repeated signs of a rebound. Low interest rates, and a somewhat improving employment picture are combining to get buyers off the sidelines with regard to real estate. New homes have seen increased demand and existing-home sales are also showing more positive trends in recent months. A housing rebound could be the first step to a general strengthening in the economy, and that could lift profits and reduce loan losses for banks like Huntington.

Downside risks for this stock include a double-dip recession and increased regulations from the federal and state governments, just to name a few. However, the current pullback appears to be a buying opportunity, especially with the stock now trading below book value -- which is about $6.34 per share. It also offers a dividend yield of 2.6%, which could be poised to rise in the future. In the past few months, this stock has traded down to around the low-$6 area and has rebounded both times. That cycle could be poised to repeat in the future, which is why investors should consider buying it now.

Key Data Points for Huntington Bancshares:

  • Current Share Price: $6.17
  • 52-Week Range: $4.97 to $7.25
  • Dividend: 16 cents, which yields 2.6%
  • 2012 Earnings Estimate: 68 cents per share
  • 2013 Earnings Estimate: 65 cents per share

Data is sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: No guarantees or representations are made. Please consult a financial advisor before making investments.