A Bank That Has Delivered 33% a Year for 10 Years

NEW YORK (TheStreet) -- For the most part, banks have not been very good investments over the last 10 years. Of course, the financial crisis of 2008 did not help.

Bank stocks have made up a lot of lost ground since their lows set in March of 2009, however. Bank of America ( BAC), for instance, has gone from a low of $3 per share back then to a current price of just over $9. Bank of America has been a terrible performer over the years, however.

Data from Best Stocks Now App

As you can see from the above screenshot, the stock has gone backwards by 9.3% per year over the last 10 years! If I delivered performance like that as a professional money manager I would not have too many clients. The stock was down a gut-wrenching 63.1% in 2008. Ouch, that hurts!

Even with more favorable circumstances over the past three years, the stock has still gone the wrong way by 19.6% per year! Yes, the last 12 months have been good for the stock as it is up 44.3% since this time last year.

Believe it or not, Citigroup ( C) done even worse. Let's take a look:

Data from Best Stocks Now App

Citigroup did even worse in 2008. The stock took a 76% beating! That is one large woodshed. Over the last 10 years, the stock has been going backwards by 17.6% per year. That makes Bank of America's -9.6% look pretty good by comparison.

Over the last five years, the stock has lost a gut-wrenching 40.4% per year of its value. Has anyone been to a Citigroup shareholders meeting lately? I was just wondering. Do they screen shareholders for rotten tomatoes on the way in?

The shares have badly trailed the S&P 500 once again over the last three years but, hallelujah, it has squeaked out a slight 1.2% victory over the market during the last 12 months. This is not a stock that I would have a lot of confidence in going forward.

Now, you could make the case that this has been a horrible decade for the banks. With the real estate bubble and crash, and the mess it left behind, how could any bank have performed well during those trouble times?

Banco Latinoamericano ( BLX), which has its headquarters in Panama, has delivered its investors a total average return of 33% per year over the last 10 years. What were Bank of America and Citigroup doing during that time period?

Over the last five years, this bank stock has delivered 10.5% of alpha per year to its happy investors. Over the last three years, investors have received an average of nine points of alpha over the S&P 500.

Check out the last 12 months! The stock is up 53%, while the S&P 500 is up 25.2%. Now those are some serious performance numbers.

Anyone been to their shareholder meetings? I know it's a long drive, but I'll bet it is a lot happier crowd than that Citigroup crowd.

I also like the fact that the bank has branches in Argentina, Mexico, Brazil, Peru, and the United States. Mexico is the third-best-performing market in the world so far this year, with a 21.6% gain. Peru is number four with a 15.5% gain and the United States is number five with a 14.6% gain.

Now if the bank could just open a branch in Thailand and India. They are up 26.2% and 25.9%, respectively, so far this year. I doubt there are many Spanish speakers there, however.

What about value, however? I have found that buying stocks just on their performance numbers is a very dangerous game. Buyers of red-hot tech stocks back in the year 2000 found out the hard way that valuation does matter. Buyers camping out in order to buy a single family home in 2006 learned the same lesson-the hard way!

With that in mind, let's take a look at the current valuation of Banco Latinoamericano:

Data from Best Stocks Now App

This small-cap bank stock is trading at just 7.97X forward earnings. By contrast the aforementioned Bank of America is trading at 9.70X forward earnings.

Banco Latinoamericano is also expected to grow at a pretty good clip over the next five years. I have a five-year price target of $38. The stock is currently trading at $22.50. Did I mention that the stock also offers a current dividend yield of 4.5%?

Out of the 3,035 stocks that I follow and rank on a daily basis with my Best Stocks Now App, Banco Latinoamericano comes in at number 96. It is also my highest-rated bank stock:

Data from Best Stocks Now App

BLX is also one of the stocks in my Income and Growth Model Portfolio that is published every week in my newsletter. To get four free weeks of my newsletter, click here.

At the time of publication the author had no position in Banco Latinoamerica stock although most of his income-seeking clients at Gunderson Capital Mgt. are long in the stock.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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