The Prudent Investor


Cutting Some Financial Institutions
February 4, 2008, 2:03 pm
Filed under: Financial

When I started putting this together my intention was to look through the financials and determine which financial company might be the best performer. That’s the typical way I go about things, but I decided to do things a little differently in this situation.

Problems with the economy started with the whole subprime mess, and all financial institutions began their big decline. Those with the highest exposure fell the hardest, so it seems to me that the easiest way to weed these losers out would be to look at the 52 week high and low and see how far each had declined. Those that had fallen the hardest would probably be the ones who must have relied on subprime issues the heaviest.

As the market tends to overreact and then correct, the companies that recovered better would be the ones of greatest interest. The whole group got severely knocked down, and the ones that shouldn’t have been grouped with the whole are in the process of correcting more quickly.

So below is the chart I put together at the beginning of the month. The first column is the 52 week high, the next is the 52 week low, the third is the percentage of the high the low represented (the higher the better), the next column is a grab of the current price, and the last column indicates the percentage recovery (the higher the better).

  L H % Cur R%
SNV $10.35 $33.82 0.31 $13.30 0.13
MI $20.92 $51.48 0.41 $28.45 0.25
RF $17.90 $37.61 0.48 $25.40 0.38
CMA $35.01 $63.89 0.55 $44.35 0.32
BBT $25.92 $44.19 0.59 $36.27 0.57
ASBC $21.38 $35.46 0.60 $28.56 0.51
WL $27.78 $44.55 0.62 $35.16 0.44

The four companies with the biggest 52-week drop are also the companies with the slowest recovery. These companies will be removed from consideration. The remaining companies each dropped about 60% and recovered about half of the decline. So here is a list of the final contenders.

Associated Banc-Corp (Nasdaq: ASBC)
Wilmington Trust Corporation (NYSE: WL)
BB&T Corp. (NYSE: BBT)

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2 Comments so far
Leave a comment

That is a really interesting way of evaluating things. I am still a pretty new investor and so I consider these valuable lessons. I was disappointed that you reduced your posts sometime last year – thanks for these.

Comment by Guppy

Guppy –

Thanks for the comment. It’s all a matter of time, which continues to get more dear these days.

Comment by glsmyth




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