Hanmi Financial Corporation: Expecting A Breakout Above $10 A Share

Summary

• Volume has been bullish over the past 30 days.
• This comes on the back of strong top and bottom line beats in Q2.
• We maintain over time that stronger profitability will return due to low valuation.

Whether the struggling banking sector is a sign of things to come in the stock-market remains to be seen. We continuously run screens for “value plays” where our objective is to find stocks with earnings power, a paying dividend as well as a strong balance sheet. When we run screens along the lines of the above parameters, financials stocks whether they be asset managers, insurance firms or banks themselves have definitely been the most dominant industry of late.

Investors can look at this in two ways. On one side, as we head into peak flue season, it could be said that the market is pricing in pretty tough times for this industry (due to an increase in cases of the corona-virus) over the next few quarters. On the other side, it could be said that some of these financial stocks present an excellent value proposition. We have stated in previous commentary that the main tailwind behind the banking industry at present is the move to digital. Yes, the lending market will obviously remain subdued until the effects of the pandemic is behind us but more profit will be made off each customer due to the introduction of new fees and charges.

The banks which have lost the most over the past 7 months or so will most likely have to raise fees the sharpest. On the contrary, the banks which remain well capitalised and which have retained strong liquidity through this downturn will be able to continue to add value with their products and services.

One such stock which looks attractive in this industry at present is Hanmi Financial (NASDAQ:HAFC). Firstly, the bank saw strong insider buying back in May when shares were trading just below $8 a share. Since then shares have rebounded back to approximately the $9.70 level but

Analyst’s Disclosure:I/we 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.