While the overall stock market is not a screaming bargain these days, there are pockets of value sprinkled throughout various sectors. However, investors must exercise caution, especially against the current backdrop of great uncertainty.
In previous articles, I highlighted two areas that appear to offer attractive risk-reward profiles: 1) High quality, multinational mega caps; and 2) Economically sensitive, non-financial stocks selling at large discounts to tangible book value. Another area that may offer compelling risk-reward profiles is micro cap financial stocks.
The following is a list of small banks and insurance companies. These are not recommendations, but rather ideas that require further research. Most of these companies are well-capitalized and sell at meaningful discounts to tangible book value. Also, many are held by well-respected value investors.
Brooklyn Federal Bancorp (NASDAQ:BFSB)
Timberland Bancorp (NASDAQ:TSBK)
1st Century Bancshares (NASDAQ:FCTY)
Hampden Bancorp (NASDAQ:HBNK)
Peoples Financial (NASDAQ:PFBX)
Omniamerican Bancorp (NASDAQ:OABC)
Severn Bancorp (NASDAQ:SVBI)
First Pactrust Bancorp (FPTB)
Investors Title (NASDAQ:ITIC)
Unico American (NASDAQ:UNAM)
21st Century (NASDAQ:TCHC)
Presidential Life (NASDAQ:PLFE)
Atlantic American (NASDAQ:AAME)
These stocks are likely selling at discounts to tangible book value due to continued concerns over lending and soft pricing in the insurance industry. As an added bonus, companies such as these are likely to become acquisition targets when economic conditions improve or if larger firms seek growth by deploying excess capital.
As always, please exercise extra caution and be sure to use limit orders when trading small and micro cap stocks.
Disclosure: Long BFSB and PLFE