Article by Investment U
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In focus this week: you have to be in the homebuilders and platinum, a little bank with a big punch and the SITFA.
Jack Bouroudjian, the CEO of Bull and Bear Partners, said in a recent interview that he sees us in a directional change market right now, meaning a move from bonds to stocks, and not being invested is very dangerous.
Adding fuel to this argument are the increasing prices of gold, oil and grains. He sees a real price move being driven by all of the stimulus actions of the central banks. This, he said, is not an environment in which to be out of the market.
Crude’s recent move toward 100, gold’s sudden activity driving it to above 1,600 again, and grains being driven by emerging market demand, and the drought in the U.S. are all early signs that inflation is real and moving up.
But maybe the most interesting part of the discussion was Bouroudjian’s idea that gold, with the huge emotional component of its supporters, is not the buy right now. Platinum, he says, has all the price potential of gold and none of the crazy emotion that’s tied to gold.
He also said that the best sign of firming in the U.S. economy, and the improving stock market, is homebuilders. Virtually all of them are showing better numbers and improving stock prices, and Bouroudjian said this is an early sign of a better market.
He’s also hot on small regional banks. This is where he sees a lot of the returns in the financials going forward….
And speaking of small banks, an article in Barron’s this past week touted a bank called Investors Bancorp, symbol ISBC. I mention this because, to me, when I read it, it had all the earmarks of a very solid play.
Barron’s called it well run, well capitalized and growing, all at a discounted price, with a misunderstood ownership structure that will be resolved in the next few months. When it is resolved, the stock could move up 25%.
This bank sold 44% of itself to the public in 2005. Until then it was wholly owned by its depositors. Not unusual for a thrift back then. The bank is expected to sell the rest of its shares to the public later this year and when it does, it will free up lots of excess capital and significant value for its shareholders.
Book value, according to Matthew Kelley, who covers the bank for Sterne Agee, could jump to $16 to $17 from its current $9, and management says they will initiate a dividend around that time.
ISBC currently trades at just 94% of its expected book value while its peers are trading at 127%. There’s lots of room for movement here.
The CEO said in a recent announcement that the dividend will precede the sale of the remaining stock and could happen in the next six to nine months.
Increased capital, increased value to stockholders, below book value, and a dividend? This looks like a solid bet to me.
One Last Thing Before the SITFA
In mid July, I did a segment here calling AAPL the only safe play in technologies and to watch it as the momentum builds before the announcement this fall of the new iPhone. It had just crossed the $600 level at that time.
Well, it’s up 20% since then and if the strength of this market holds, we could see a significant move above its record price of last week. As I said then, this thing is a monster when the emotion of its followers and the momentum in its stock starts to build. It’s something to watch when it gets moving.
My advice then and now: Buy before the new iPhone is unveiled, sell on the news.
Finally, the SITFA
This goes out to all the guys I worked with in the brokerage business, who are still in the business.
A recent Journal article talked about a new way of evaluating the possibility of recidivism for those who have been paroled from prison. It’s called COMPAS. It has proven to be more accurate at predicting who will end up back in jail than all previous systems.
That’s a good thing.
Here’s the funny part.
The article featured a 60-year-old man who had been in jail numerous times since the 90s. With the use of the compass program he has recently competed his three-year probation with no problems, which means he didn’t go back to jail on a violation of some sort, and is now studying for his GED and he wants to be, are you ready, a stock broker.
I guess his multiple stints in jail did prepare him for something.
That’s it.
Good Investing,
Steve
Article by Investment U
