The next six articles in my “Fool Revisited” series (going up today and tomorrow) are going to be pretty similar. Like my last article, they are going to be about smaller, regional banks. In what I thought was going to be a winning formula going forward – I planned to return to similar articles as a writer in the future – I screened banks based on the region they fell under using FinViz.com, my screener of choice back when I was writing for the Fool (it still is pretty cool, though a lot of the things I used it for in the past are no longer free and I don’t have the resources at present to pay for them).
The first of the articles covers banks from the Southwest Region of the United States, which is defined for these purposes as banks based in or with the majority of their operations in the states of Texas, Oklahoma, and Missouri. Instead of writing about all 20+ banks in the region, I screened them down to a much more manageable list. First, I eliminated all banks with a market cap below $300 million. Then I used four other factors to get to my final list: only profitable banks (over the prior 12 months), a low P/B (looks like I only featured banks under 2, though lower is better), a positive dividend, and quality net income margin.
I know that you want to see it, so here is the old tweet of the article from back in the day:
Had this article been written a little later in my tenure at the Fool, my list probably would have been much smaller, if only because of the “tickering” rules in place at the time. I ended up with a list of 8 banks from the region, and selected International Bancshares (Nasdaq: IBOC) as the best bank.
And while its performance was among the best, as you can see from the chart below, two other banks would have been better choices – First Financial Bancshares (Nasdaq: FFIN) and BancFirst Corporation (Nasdaq: BANF). Using the compound annual growth rate (CAGR) and total growth, since article publication on October 6, 2011 through January 26, 2018:
|Stock||Start Price||End Price||CAGR||Total Growth||Value of $10,000|
|Prosperity Bancshares (NYSE: PB)||$31.72||$76.97||15.08%||142.65%||$24,265|
|Cullen/Frost Bankers (NYSE: CFR)||$39.91||$106.25||16.78%||166.22%||$26,622|
|First Financial Bancshares||$12.36||$46.75||23.46%||278.24%||$37,824|
|BOK Financial (Nasdaq: BOKF)||$40.89||$98.07||14.86%||139.84%||$23,984|
|UMB Financial (Nasdaq: UMBF)||$31.51||$77.34||15.29%||145.45%||$24,545|
Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits
Unfortunately, there are currently no banks in this region that I would recommend now; they have all “grown” out of being a reasonable option. For example, Prosperity Bancshares has the lowest P/B ratio of the eight banks profile, and it is over 1 (at 1.35), minimizing the growth potential of an investment in the bank – the “buy at half, sell at two” adage mentioned in the original article. We might be able to find a decent investment option in some other regions, but sadly nothing remains in the Southwest.
Until next time…
Disclaimer: I do not personally own shares of the companies mentioned here, and I have no plans to purchase shares of any company mentioned within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.