Suttmeier: Trading Buy Rated Community Banks

NEW YORK (TheStreet) -- On June 10 I wrote Community Banks Remain Reluctant To Lend where I profiled 13 community banks, where nine were rated buy. In today's post I note that five of these community banks have been downgraded to hold including one this morning. I added two community banks that were upgraded to buy since June 10.

My benchmark for community banks is the America's Community Bankers Index (203.54) has been a leader of late, setting a new multi-year high at 204.48 on Monday July 1. My quarterly value level is 183.77 with semiannual and monthly pivots at 195.75 and 200.30 and weekly risky level at 205.87.

Chart Courtesy of Thomson/Reuters

Among the 11 community banks profiled today, seven are undervalued and four are overvalued. All have had tremendous gains of 28.4% to 318.5% over the last 12 months. The projections for the next 12 months call for weak gains of just 1.7% to 8.9%. Two banks have single-digit 12 month trailing price-to-earnings ratios and four have P/E above 20.0.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

Banner ( BANR) ($34.60 vs. $32.94 on June 10) set a multi-year high at $34.99 on July 1. This stock has been downgraded to hold since the June 10 post. My semiannual value level is $32.15 with a monthly pivot at $34.31.

Popular ( BPOP) ($30.98 vs. $29.05 on June 10) set a multi-year high at $31.50 on July 1. This stock has been downgraded to hold since the June 10 post. My quarterly value level is $30.16 with a weekly pivot at $30.60 and a monthly risky level at $34.48.

Capital City Bank Group ( CCBG) ($11.91 vs. $11.33 on June 10) set a multi-year high at $12.64 on April 25. The stock has been downgraded to hold since the June 10 post. My quarterly value level is $10.22 with a semiannual pivot at $10.75 and monthly risky level at $13.00.

Central Pacific Financial ( CPF) ($18.13 vs. $18.33 on June 10) set a multi-year high at $18.88 on May 30. The stock maintains its buy rating with a quarterly value level at $15.31, a semiannual pivot at $17.80 and monthly weekly risky level at $18.71.

Flagstar Bancorp ( FBC) ($14.29 vs. $13.49 on June 10) set a multi-year high at $20.38 on Jan. 2. The stock maintains its buy rating with a semiannual value level at $11.59 with a weekly pivot at $13.93 and monthly risky level at $16.26.

First Bancorp ( FBP) ($7.33 vs. $6.34 on June 10) set a new multi-year high at $7.36 on July 1. The stock has been downgraded to hold from buy since the June 10 post. My quarterly value level is $5.48 with a monthly pivot at $7.24.

Farmers Capital Bank ( FFKT) ($22.50 vs. $22.00 on June 10) set a multi-year high at $23.00 on June 26 and re-tested on July 1. The stock maintains its buy rating with a quarterly value level at $18.37 with a monthly risky level at $23.09.

First M&F ( FMFC) ($16.14 vs. $15.50 on June 10) set a multi-year high at $16.40 on July 1. The stock has been downgraded to hold from buy this morning. My quarterly value level is $13.14 with a monthly pivot at $16.32.

HomeStreet ( HMST) ($21.81) has been upgraded to buy since June 10. The stock set a multi-year high at $28.73 on Feb .11. My monthly value level is $13.78 with a weekly risky level at $22.46.

Old Second Bancorp ( OSBC) ($5.52) has been upgraded to buy since June 10. The stock set a multi-year high at $6.07 on May 20. My quarterly value level is $4.12 with a monthly pivot at $5.80 with a weekly risky level at $6.66.

Sterling Financial ( STSA) ($24.36 vs $21.90 on June 10) set a new multi-year high at $24.68 on July 1. The stock maintains its buy rating with a monthly value level at $22.72 with a quarterly pivot at $24.21 and semiannual risky level at $28.26.

At the time of publication the author held no positions in any of the stocks mentioned.

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

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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