There are a number of reasons why the financials are back in focus. As a group they're up roughly 35% in just three months - after an even more impressive spurt earlier this year. Yet at the same time they've already backed off their September highs by about 10%. Individual issues may have risen or fallen slightly more or less during that period, but the question for the sector remains: what's next for the financials? Have they corrected significantly enough to afford investors a reasonable entry point? Or is it worthwhile waiting a little longer for the long-expected profit-taking to conclude?
IN PICTURES: Learn To Invest In 10 Steps
Choosing Financials
The question is one we'd rather not entertain, or, rather, we'd prefer to approach it a little more philosophically. Why not just sift through those with the best fundamentals and let the ones that evince real value be chosen.
With that in mind, we will highlight a number companies that are mid- to micro-cap financials with strong P/Es and dividend yields, and that currently trade below book value.
Mid-American Small Caps
FFD Financial Corporation (NASDAQ:FFDF) is a micro-cap savings and loan operation based in Ohio. The company's stock offers investors a reasonable 5.3% annually and trades with a one-year, trailing P/E ratio of 12.5.
FFDF also trades at roughly three quarters of the company's break-up value, with a price-to-book ratio of 0.73. Noteworthy too, perhaps, is the fact that FFD saw fit to raise its quarterly dividend last year during the very heart of the global banking crisis.
HopFed Bancorp Inc. (NASDAQ:HFBC) is another small banking concern with branches in Kentucky and Tennessee. The stock yields 4.5% annually and trades with an earnings multiple of 10.27-times last year's receipts and a P/B of just 0.47. Price to sales on the company comes in at an equally impressive 1.13.
Bank of McKenney (NASDAQ:BOMK) shares yield 4.5% and trade with a P/E of 10. The bank's operations are centered around several counties in Virginia, where it offers traditional banking services to local residents and businesses.
The shares have increased in value by over 20% since bottoming in April, yet still have a very competitive P/B of just 0.63.
Less than Half of Book Value
California First National Bancorp (NASDAQ:CFNB) currently pays investors 4.44% per annum to hold the shares. They trade with a P/E of 12 and a P/B of 0.47.
CFNB recently reported a 47% year-over-year increase in per share earnings. The company has a market cap of $120 million.
Banc Latinamericano de Comercio Exterior, S.A. (NYSE:BLX) is the product of several Latin American and Caribbean central banks desire to promote trade and finance in the region. The shares have a P/B multiple of just 0.86 and offer a 4.4% dividend yield. The P/E ratio on the stock is 12.
The Wrap
Small- and mid-cap financials that stayed out of the limelight during last year's market meltdown may be up-and-coming stars in the months ahead. And certainly those with the best fundamentals will thrive over the long term. (To learn more, read Determining What Market Cap Suits Your Style.)
