During the initial stages of the market’s reaction to Donald Trump’s surprise Election Day victory small cap stocks were on fire. The Russell 2000 small cap index added 20% in a little over a month. Helping to fuel that rally were regional banks. These banks were at the perfect intersection of expectations for rate hikes and hopes of a reinvigorated US economy. As a result, several regional bank stocks became darlings of the stock market. With the MAGA Trade well in our rearview mirror, it may be time to reconsider a few of these stocks. Or, at the very least, take a look under the hood and perhaps even take some risk off the table.
Today’s Bear of the Day is one of these regional bank stocks, Investar Holding Corporation (ISTR - Free Report) operates as the bank holding company for Investar Bank that provides a range of commercial banking products for individuals and small to medium-sized businesses in South Louisiana. It accepts various deposit products and services, such as savings, checking, money market, NOW, and individual retirement accounts, as well as various certificates of deposit; debit cards; and mobile banking services. The company also offers multifamily, farmland, and commercial real estate loans; loans for the construction of commercial projects, and single family residential and multifamily properties; commercial and industrial loans, including working capital lines of credit and equipment loans; consumer loans comprising secured and unsecured installment and term loans, second mortgages, and home equity loans and lines of credit, as well as auto loans; and one-to-four family residential real estate loans consisting of second and other mortgage loans.
Earnings estimates have dropped for the current quarter, next quarter and the current year. Quietly we’ve seen our Zacks Consensus Estimate come down from 29 cents to 23 cents for the current quarter. Next quarter’s estimates have dipped from 33 cents to 29 cents. The current year Zacks Consensus Estimate has gone from $1.25 to $1.12. This quarter, EPS is expected to contract 10% from last year’s number.
These aren’t exactly shocking numbers but when you look at ISTR’s performance since early March you would expect to see EPS moving in a different direction. Since March 7th shares of ISTR are up 13.9%. Compare that to the rest of the Southeast Regional Banking Industry which has actually seen a dip of 7.9%. That represents 20% outperformance above the industry.
Investors looking for other bank stocks in the same industry should check out Zacks Rank #1 (Strong Buy) stocks Green Bancorp (GNBC - Free Report) and Home Bancorp (HBCP - Free Report) .
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It's not the one you think.
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