I like to keep investors posted on the results of some of my surveys and discuss what fellow investors want to know about. The number one answer to most surveys was “hot stocks ready to break out,” which is exactly what I’m going to talk about now.
I’ve made a list of four hot stocks that are ready to breakout next year. All four have great fundamentals and each has the potential to benefit from the “January effect” that supports small-cap and illiquid stocks.
Let’s take a look now.
Intervest Bancshares (IBCA) is an attractive play on rising interest rates. IBCA is a regional bank whose stock has stayed between $7 and $8 for the last five months, which is a large discount to tangible book value of $8.77. Earnings have been pressured due to low interest margins, but an eventual rise in interest rates could raise margins meaningfully from the current depressed level of 2.32%.
In the company’s last quarterly report, I was encouraged to see loans outstanding increased from the previous quarter to $1.1 billion from $1.05 billion. In addition, the bank is well-capitalized (with a Tier One Common ratio of 14.87%), and most loans are for commercial real estate and well-secured by property values, so credit losses should remain minimal.
With loan losses at a minimum, book value and capital will continue to grow, and with the company’s TARP preferred stock retired earlier this year, IBCA will be in a position to return capital to shareholders through a dividend or a share repurchase despite the tough operating environment.