Stockpickr: Buy Banks the 'Mad Money' Way
In Jim Cramer's latest book, Mad Money: Watch TV, Get Rich, he describes his technique for valuing banks: "I know that banks tend to get acquired when they sell at less than two-and-a-half times their book value. ... That's the best way to evaluate banks."
And even in his book Confessions of a Street Addict, published in 2003, Jim mentions that he always owned a collection of regional banks because they paid steady dividends and were stable performers for his hedge fund.
So I did a screen for banks with market caps under $2 billion that are trading for less than 1.5 times book value. I also looked for things such as decreases in nonperforming loans (meaning there isn't much default risk) and increases in deposits and branches (meaning they are probably increasing their future book value).
Here is the resulting portfolio of regional banks with a price-to-book of ratio less than 1.5 times. I also searched among the results to find the banks that were growing assets and decreasing nonperforming loans (meaning they were increasing the quality of their loans). An interesting anecdote is that I added this bank portfolio to Stockpickr Jan. 7, and on Jan. 8, Jim mentioned one of the banks on his show.First, I found Rainer Pacific Financial Group (RPFG). It owns Rainier Pacific Savings Bank, which has branches primarily in one county: Tacoma-Pierce County in the state of Washington.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV