Good advice is a hard commodity to find. Once you find it, use it and stay with it.
Good advice is a hard commodity to find. Once you find it, use it and stay with it.
What a year 2024 was when valuations reached extreme levels in some sectors. This will be a great time to position your portfolio to about 25% in smaller banks that are simply great bargains today and less risky than many other high-priced stocks today.
We specialize in this sector and have a strong track record of 30-plus years of finding the next takeover ahead of its time. Also and more importantly we look for banks with strong earnings trading near book value and a P/E of 10 or less in which many can be found today at these levels.
Could this be the return on the 1999 -2000 period when the Nasdaq peaked and bank stocks ripped up? There are many correlations, so we feel the answer is yes, this year.
The new administration surely can’t hurt for deals in 2025, and loan growth will be slow, due to higher rates, so expect lots of bank mergers as the mismatch of high-priced larger banks and low-priced smaller banks should create many deals. If a bank can't grow it needs to sell. Many banks will be forced to merge so the prices will remain lower than average on most deals around 1.20 to 1.60 times book on average.
With this mismatch in the current valuations of the larger and smaller banks, deals are a win-win for both sides. In 2024 we saw our biggest premium ever on a bank deal MCPH trading at $6 a share got a $32 cash offer and sold.
Our largest holding Oppenheimer (OPY) hit new highs and at year-end, it was just off its high, we sold some but this position still remains 32% of all funds today and is by far our largest holding. Earnings on OPY could be over $9.00 a share in the next quarter. With performance bonus fees a driving factor, the stock could easily move to $80 plus a share and still be worth $120 if they sell the firm. You can do the math that is a cheap stock still at $63.
As to the Mag 7 and most high-flying Tech stocks they should be sold today and 25% of your funds should be in the smaller bank stocks.
In the oil sector, there are a few buys today like MUR and OXY!
We have also “Shorted” several high-flying regional banks like PRK, over $195 just too pricey.
Many banks pay 5% stock dividends and 3% to 6% cash dividends. Invest in small banks with us and enjoy safe solid returns of 10% - 12% and with a takeover then expect a much higher return.
So if you are looking for stocks with P/E’s of 5 -10 and trading at or near cash value our firm is for you, we have over 50 years of market experience and have had our newsletter rated number one many times in the past. We take much less than overall market risk, so let us help you and your family. We have spotted over 20 takeovers in the past decade before they were public. Bank investors are smart and so are many bankers. Today's world moves fast as do the markets, make sure you have someone helping you that works 24/7. Some firms can't even buy Nasdaq small-cap stocks, that’s why you get such value in today 's high-priced world.
Let us help guide your portfolio into a successful future. Call or email us now!
Douglas Hughes
12/29/2024
203-942-5274
HughesInvestmentManagment.com
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