One of the hottest demographically attractive banking regions, according to Zacks Research, is the Southeastern United States. Recently, we highlighted small banks serving the demographically attractive Western U.S. region (see “Three regional bank buys,” Modern Trader April 2017).
My top-down investing interest is piqued by obvious metrics. The Zacks Industry Rank for Banks-Southeast is currently #50 out of 265 industries we rank (top 19%). The Finance sector is ranked #2 out of 15 (top 13%).
“Banking by region” shows how Zacks currently ranks USA banking regions. Demographically attractive Sunbelt region shares have been bid up the most.
Current higher ranked regional banking areas — the Northeast and Midwest — are the snowy lands. These areas had one-year bank returns that lagged behind, a bit, in the huge share price run-up on USA regional bank shares.
Zacks VGM scores of “F,” based on weak Zacks value metrics, is the norm in bank stock after bank stock.
After this Southeast bank industry share price run (+70%), what can be done profitably?
To give a flavor for how to invest, here is one stock from each major style class (see “Top contenders”). The first one is classified as a growth stock; the second, a value stock and the third is a momentum stock.
- National Commerce Corporation (NCOM) is an Alabama bank holding company. What’s the attraction? Annual earnings per share (EPS) looks to go from $1.81 a share this year to $2.29 a share next year. That’s a projected EPS growth rate of +12.5%.
- Fidelity Southern Corporation (LION) is a bank serving Atlanta and Jacksonville, Fla. What’s the attraction? The forward P/E is 15.27. That’s a reasonably priced stock.
- Eastern Virginia Bankshares (EVBS) is a Virginia bank holding company. What’s the attraction (and danger)? This stock price technical chart shows some stiff momentum. The Zacks Momentum score is B. You have to be careful here.