Trade of the Day: Springleaf Financial (LEAF)

by Jon Markman | January 21, 2014 9:49 am

Overall, banks pulled back 0.7% as a group in the past week even though it is still one of the best groups for the year. The earnings calendar meant results from Wells Fargo (WFC[1]), Morgan Stanley (MS[2]) and the like were fairly well-received.

One of the more positive dynamics continued to revolve around credit/asset quality. Expect that to continue. WFC also noted that more customers have begun to express an interest in building something, adding something and investing in something. Bank of America (BAC[3]) was the notable post-earnings gainer[4] among the money center names last week, while The PNC Financial Services Group (PNC[5]) at +4.4% led the regionals.

Even beyond the excitement about the earnings calendar, I’m seeing a lot of names to like in the finance space right now. Springleaf Holdings (LEAF[6]) is a $3 billion consumer finance and insurance company that provides loans based on non-real estate collateral, such as consumer goods, autos, boats and the like. It basically makes loans to people with low credit ratings, as long as they have something to offer as collateral. This was one of the kinds of firms that got people in trouble in the run-up to the financial crisis of 2007-2009, and they are back, with the stock showing noteworthy upside potential in the near term.

LEAF pulled back by 1.3% Friday, but I think it simply makes for an attractive entry point, with a buy limit up to $26.25.

LEAF stock should get rolling again this week and, as this pullback completes, the shares should advance toward $30. I recommend taking partial profits by selling half of the position at the initial target of $27.85 leaving the rest of your shares on the table to advance to that $30 level. I also recommend you set a stop at $24.50, good after 11 a.m. ET only.

And a note that LEAF isn’t scheduled to provide its earnings until early March but estimates have stayed steady at 46 cents per share.

Big banks on the earnings calendar for this week include U.S. Bancorp (USB[7]), but regionals like KeyBank (KEY[8]) will largely take the spotlight.

Jon Markman operates the investment firm Markman Capital Insights[9]. He also offers a daily trading advisory service, Trader’s Advantage[10], and CounterPoint Options[11], a service that helps individual traders make steady, consistent profits with volatility-related instruments.

Follow Jon Markman[12] at Google+.

 

Endnotes:

  1. WFC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WFC
  2. MS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MS
  3. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  4. notable post-earnings gainer: https://investorplace.com/2014/01/bank-stocks-bac-homebuilders-len-pmh-hov/
  5. PNC: http://studio-5.financialcontent.com/investplace/quote?Symbol=PNC
  6. LEAF: http://studio-5.financialcontent.com/investplace/quote?Symbol=LEAF
  7. USB: http://studio-5.financialcontent.com/investplace/quote?Symbol=USB
  8. KEY: http://studio-5.financialcontent.com/investplace/quote?Symbol=KEY
  9. Markman Capital Insights: http://www.markmancapital.net/
  10. Trader’s Advantage: http://www.jonmarkman.com/
  11. CounterPoint Options: https://order.investorplace.com/index.jsp?sid=SE8121
  12. Jon Markman: https://plus.google.com/109535523304238577573?rel=author

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