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What an Analyst Who Likes Astoria Financial Is Missing

Stocks in this article: AF



Astoria's operating performance in 2013 hasn't been that much better than that of 2012, and thrifts in general, several with operating performance far superior to Astoria's, appreciated significantly, if not as much as Astoria. Even with its massive 2013 price appreciation, the $1.35 billion Astoria spent on share buybacks from 2001 to 2006 appears to have been wasted; the weighted average repurchase price over this period was $23. Astoria hasn't repurchased shares since 2008, even when they traded below tangible book value, despite the availability of excess capital.

One final point: Even with AF's depressed late 2012 valuation, short interest in its shares in mid-December 2012 was 11.6%. Short interest fell steadily during 2013, and now stands at a much lower, although still high at 4.9%. So there's some skepticism in the market about where Astoria's price might go from here.

I've just presented what I consider several useful facts about Astoria Financial. Maybe Kleinhanzl believes other facts matter more, and maybe those other facts will propel the stock to $17 per share and beyond in the near term. Or maybe facts don't matter. If a plane runs out of fuel, what happens to it is independent of its passengers' hopes.

But in the stock market, investor hope can be enough to sustain prices, at least for awhile. An investor may choose to bet on hope, but mistaking that for a bet on fundamentals can lead to poor returns in tech stocks and bank stocks alike.

This may be the year that bank and thrift investors relearn this lesson.

At the time of publication, the author had no position the stock mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Harvard Winters is a former financial services sector investment banker who now writes research on banks and thrifts.
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