Banking and other financial stocks are in a good place right now. And that’s especially true for local and regional banks. Rates are low which means it’s a good time to sell loans. Also, the consumer is confident and strong, so there is still demand. For example, car sales are going up and new cars are getting financing that goes out six or even seven years now.
That keeps payments lower, but it adds a ton of interest that the banks get as revenue. Plus, with regional banks, you don’t have to worry about them investing in a lot of risky credit swaps or mortgage derivatives.
It’s a bread-and-butter business for the most part and as long as the U.S. economy is chugging along, so will regional banks. I call stocks like these “bulletproof” stocks because of the protection they add to your portfolio.
Below are seven bank stocks worth investing in. Only one is a big bank — one of the biggest in the world — and the rest are trade war-free, U.S.-focused banks.
Bank Stocks to Buy: Meridian Bancorp (EBSB)
Meridian Bancorp (NASDAQ:EBSB) is a holding company that runs East Boston Savings Bank. It’s a relative newcomer, only in operation since 2014. The bank itself has been around since 1848.
This is the new model for traditional banks. You build a holding company and then you acquire local banks to build a regional bank presence. This provides economies of scale in loans, U.S. Treasury management and other aspects of the business that help keep margins strong.
The stock is up 38% year-to-date, which is pretty good for a local bank stock, outperforming the S&P 500 handily. In the past year, it’s up 23%, which includes last year’s interest rate hikes that don’t help banks much. It also delivers a 1.4% dividend.
Stock Yards Bancorp (SYBT)
Stock Yards Bancorp (NASDAQ:SYBT) is a Louisville, Kentucky bank that offers personal and commercial financial services. It’s the parent of Stock Yards Bank & Trust Company, which has been around since 1904.
Local banks have become very attractive, especially now that financial technology has become pervasive in the sector. While tech was usually the domain of the big banks that had their own IT departments and proprietary programs, now banks can hire companies to customize tech products for them.
In this way, they are able to leverage their small-town familiarity with big bank efficiency and interfaces. This is especially helpful as big banks start expanding into smaller markets.
Stock Yards Bancorp has grown its dividend consistently for 7 years, which meets my “bulletproof” criteria of 7 straight years of income growth. And SYBT stock is up nearly 30% in the past year and still has a solid dividend around 2.7%.
Opus Bank (OPB)
Opus Bank (NASDAQ:OPB) is a commercial bank that operates out of Irvine, California, just south of Los Angeles.
There are a handful of banks in northern and southern California that have built a business to help companies and entrepreneurs create small private equity-style firms.
High net worth individuals or companies that have assets to invest use the bank as a partner to invest in development-stage companies. This has been a very good business for other banks and OPB has been around since 1982, so it has a good lay of the land and long relationships with the community.
The stock has a 1.7% dividend which is keeping pace with inflation, and that’s after a nearly 30% run for the stock in the past 12 months.
Hilltop Holdings (HTH)
Hilltop Holdings (NYSE:HTH) run PlainsCapital Bank, which is located in Dallas, Texas area.
Texas has been seeing a lot companies relocate to the state in recent years, as technology has allowed companies to be more dispersed from their core competitors – like Silicon Valley for example. The firms don’t have to pay the huge premiums for real estate and if they’re big enough, Texas has been very generous with state tax breaks.
And as businesses move, so do people. This is the ideal situation for a local bank like Hilltop Holdings. It doesn’t have to work hard to find customers because it has new customers arriving in its market.
HTH also operates a subsidiary PrimeLending, which is an in-house loan processing, underwriting and closing shop. PrimeLending closes the loop on each real estate transaction it gets involved in.
The stock is up 23% in the past year and has a 1.4% dividend.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) is one of the oldest banks in the United States, and one of the largest in the world. It has over $2 trillion in assets. Commercial bank OPB has about $7.8 billion in assets and SYBT has $3.2 billion, by comparison.
JPM is massive. It’s one of the top 5 banks in the world. It has a massive trading desk, but didn’t get caught up in 2008 financial mess like many of its peers. It remains well managed and works to keep its customers and workers satisfied.
In times like this, JPM is winner on sheer volume. With commercial and personal accounts, real estate, credit cards, investment services and everything else, it is a quality global financial institution that will endure.
The stock is up 22% this year and provides a healthy 2.8% dividend. Tracing its roots back to 1799, this bank will be around for at least another century.
United Community Banks (UCBI)
United Community Banks (NASDAQ:UCBI) is a regional bank that is headquartered in Georgia but also has branches in the North Carolina, South Carolina and Tennessee.
It’s a good-sized operation, with almost 150 offices and more than $12 billion in assets. It offers services for business and personal banking. Its headquarters in northern Georgia puts it in a great spot for access to major metropolitan areas like Atlanta, Charlotte, Chattanooga and Knoxville. All these areas are growing as business and people relocate there.
The stock is up 22% in the past year and has benefitted from the region’s growth, as well as its ability to be competitive with larger and smaller institutions. It provides a solid 2.3% yield, which continues to outpace inflation. And it’s still a good deal with a trailing price-to-earnings of 13.6.
Flagstar Bancorp (FBC)
Flagstar Bancorp (NYSE:FBC) may not be a name you’re familiar with, but this Troy, Michigan-based bank is one of the largest residential mortgage services in the U.S.
The financial crisis in 2008 wasn’t particularly kind to FBC, but it paid back all its Troubled Asset Relief Program debts in 2016 and has been back on track since then. It was even a sponsor of the Detroit Pistons jersey in recent years.
Flagstar Bancorp is now pretty well dispersed from its Michigan home, with 160 offices in Indiana, California, Wisconsin and Ohio. It currently manages $200 billion in home loans.
Basically, when you get a mortgage from your bank, it often doesn’t hold the mortgage but sells it to another bank or company that “services” the loan. The servicer gets a fee for doing so plus gets to own that asset. It’s a great position to be in in the current market.
The stock has had a big year as rates have dropped, up 38% year-to-date. But it doesn’t deliver much of a dividend. Just remember, this is one of most interest-rate sensitive picks of the bunch.
Prepare for a Shifting Market
To prepare for a shifting market, I suggest steps that every investor should take right now:
- Follow the money: Buy stocks that are seeing massive cash infusions.
- Protect your portfolio: Invest in market-beating stocks with my simple trick.
- Go risk-off: Strong fundamentals are more paramount than ever.
I don’t say this to boast but to demonstrate how well my system works, which is why my track record includes the following:
- 274% gain in semiconductor stock Nvidia (NASDAQ:NVDA)
- 134% gain in defensive plays
- 123% gain in a personnel service stock
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.