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Bank Stocks: Buy this rock-solid contrarian banking play now

Posted January 24, 2008

 

A Today's Financial News Research Report:
"Bank stock valuations are collapsing. But contrarian investors can pick up excellent bargains in rock-solid banking equities whose balance sheets have been unaffected by the subprime melt-down." — J. Christoph Amberger

by Stephanie Grimmett and J. Christoph Amberger, TodaysFinancialNews.com

 

Today's Financial News feed provides an independent and practical perspective on the U.S. and global investment markets.
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Baltimore (TFN): Bank stocks have been taking it on the chin since last fall. Citigroup, Bear Stearns, Bank of America… all have been writing off quarterly losses the size of a moderate-sized country's GDP. Their debt derivatives have sent European banks into bankruptcy and are now threatening to throw a spotlight on China's fast and lose credit policies.

No time to read?  Watch the financial video…

But with all that money running in panic from banking stocks, TFN's research team has discovered a fantastic deal for you. It’s a bank with solid fundamentals and with its hands relatively clean of the subprime blood that's currently dripping from Wall Street.

SNV Chart

At first glance, Synovus Financial Corporation (SNV: NYSE) may look like the worst of the worst mortgage lender tumbles. The stock didn’t just fall at the end of 2007. It collapsed in on itself in one day. At market open on December 31, SNV was at $24.08. At market close on January 2, it was at $10.80.

As far as banking stocks go, this one looks very good!

Funny enough, Synovus hasn’t announced any terrifying numbers for 2007. In fact, results are looking great, with healthy financials in the last three quarters that look a thousand times better than any of the big guys on Wall Street these days.

Synovus is a consumer and commercial bank centered in the southeast, with branches in Georgia, Alabama, South Carolina, Florida and Tennessee. You can just imagine how much the bank’s corporate customers in the Sun Belt love the rising commodities prices. And those fields of soybeans and sugar cane could do nothing but rise in value as global food (and fuel) prices have soared.

So why the drop?

Spinning off its electronic payment company

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Synovus just spun off its electronic payment services subsidiary TSYS into a separate public company. The market reacted strongly to the news, too strongly in my opinion. TSYS is a great company. And giving TSYS stock to every Synovus investor was an interesting move for the bank.

But creating a separate company out of the electronic payment leader is not the end of Synovus. In fact, it just means the bank will be able to focus on its core business.

Synovus is a company with a solid roof over its head in a sector where many of its competitors have front row tickets to watching the sky falling. The bank has a healthy market presence in its region and is still expanding.

In fact, when the Dow collapsed, the stock gained over 5%.

Our recommendation: Buy Synovus (SNV: NYSE) at current levels and look for a gain of up to 50% over the next three quarters.

 

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Posted by J. Christoph Amberger · Filed Under Hot Stock Pick of the Week 

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