This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Community Bank Stocks Are Overvalued, Overbought

NEW YORK (TheStreet) -- Earnings season for community banks is essentially over, and the FDIC-insured publicly traded institutions I have been profiling had mixed results at best. Only 5 of the 23 banks in my buy-and-trade universe of community banks beat their earnings estimates, nine matched expectations and nine missed their EPS projections.

Of the 23 community banks, three have been downgraded to hold from buy, leaving us with eight buy rated stocks and 15 hold rated stocks.

My benchmark for community banks is the America's Community Bankers Index (ABAQ), which represents 389 publicly-traded community banks.

The weekly chart for ABAQ (181.59) is positive but overbought with the five-week modified moving average at 176.22 and the 200-week simple moving average at 155.43. ABAQ is below its April 2010 high at 184.90. My quarterly value level is 158.71 with a monthly pivot at 181.63 and weekly risky level at 188.42.

Chart Courtesy of Thomson/Reuters

The finance sector is 17.0% overvalued with the banks-northeast industry 26.7% overvalued, the banks-southeast industry 12.7% overvalued, the banks-midwest industry 3.7% overvalued, the banks-west industry 3.9% overvalued and the finance savings and loan industry 28.5% overvalued.

On Dec. 5, I wrote, FDIC Reports Positive Banking System Data where I presented the data and my analysis of the FDIC Quarterly Banking Profile for Q3 2012. I concluded that while the banking system has been reducing exposures to bad real estate loans, the exposures among community banks remain large by longer-term standards.

Then on Dec 11, I wrote, Construction and Development Loan Exposure Continues to Plague Community Banks where I last profiled the community bank stocks I am profiling today.

My suggested strategy for these bank stocks is to book profits on strength to risky levels. With an unfavorable risk reward a suggested allocation to these names should be reduced by at least 50%.


I am in Fort Lauderdale, Fla., today and tomorrow for the Information Management Network's tird annual Florida Bank & Financial Institutions Special Asset Executive Conference on Real Estate Workouts. I will be a panelist Tuesday morning explaining why I think that "The Great Credit Crunch Continues in 2013." My focus is the FDIC Quarterly Banking Profile. Send me an email if you'd like a copy of my Power Point Presentation.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,086.63 -26.91 -0.16%
S&P 500 1,987.01 +3.48 0.18%
NASDAQ 4,473.6970 +17.6810 0.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs