One to Stay Away From

The trader talks about the problems with Commonwealth Bancorp.
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These are the times that totally try -- if not press or draw and quarter -- value men's souls. Took this fax that just hit my desk from

Friedman Billings Ramsey

(FBR)

, the influential firm. FBR is

downgrading

Commonwealth Bancorp of Pennsylvania

(CMSB)

.

I know Commonwealth Bancorp -- heck, I put my dad into it a few years back. After the takeouts of

Meridian

,

Continental

,

Midlantic

and

Independence

in the late '80s and early '90s, there weren't many free-standing banks left in eastern Pennsylvania, the area of the country where I grew up.

I figured that Commonwealth, trading at 15, was a layup to get taken over. I figured it would go for as much as 2.5 times book, maybe 3, (10 bucks) for someone who'd want to fill in market share in the Pennsylvania area. In the meantime, it would make the numbers because the housing market in my old neighborhood is booming.

The stock ran up to the mid-20s on takeover talk, and then, when things turned tough for the savings and loans because of

Fed

tightenings, the stock proceeded to have a sickening slide down to the midteens. Then, despite massive insider and corporate buying, it stagnated, until its recent collapse to the low teens.

But that low valuation doesn't matter. It doesn't protect you from earnings disappointments or downgrades.

FBR, which routinely moves these stocks, is taking Commonwealth Bancorp down to accumulate from buy because the earnings aren't there. The company's mortgage banking operation is hurting the numbers, and when numbers come down, stocks go down -- even from these levels.

Be prepared for this one to go lower.

Just another day in S&L hell, if you ask me.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.