We saw a host of regional banks report stubbornly high loan
losses on Monday, and investors have grown skittish about the
regional banks that still have yet to report quarterly results.
Sterling Financial (Nasdaq: STSA
Pacific State Bancorp (Nasdaq: PSBC)
Midwest Banc Holdings (Nasdaq: MBHI
W Holding (
all saw their shares fall by -15% to -20% in Tuesday trading. These
banks all share a common trait: their market caps have shrunk to
troubling low levels. The string of FDIC-induced bank closures may
continue for a while.
That would be good news for the healthier banks, which would have a
chance to pick up their weakened brethren at fire-sale prices.
Indeed many banks have traded up recently, as the
Nasdaq Bank Index (Nasdaq: NAS)
has risen nearly +25% in the last three months.
Tuesday morning trading has not been kind to investors in home
Tuesday Morning (Nasdaq: TUES)
, which is falling sharply for a second straight day after
reporting tepid fiscal third-quarter results Monday. As the stock
continues to drop, so does the interest . In these situations, it
pays to monitor a stock, and hold off taking any action until
shares have truly found a floor. For retailers like Tuesday
Morning, an eventual decline in unemployment rates could be the
catalyst to get investors focused on a potential increase in
same-store sales - and profits.
Analysts at Jefferies have a bit of egg on their face today after
talking up shares of
Office Depot (
on Monday. The analysts' bullish preview of first quarter results
pushed shares up above $9 on Monday to a 52-week high on an
intra-day basis. Shares gave back all of those gains - and more -
in Tuesday trading, as sales and profits missed estimates. A
lackluster outlook for the second quarter also weighed on shares.
But this is a late cycle play on the economy, closely tied to the
unemployment rate . As companies start to hire again, their need
for office supplies will grow commensurately. So the analysts at
Jefferies may ultimately prove correct but premature. When the
business turns, the stock could prove to be a real bargain: Office
Depot earned an average of $1.28 a share from 2004 to 2007. The
company's foot print has shrunk somewhat since then, but earnings
power of $1 a share is quite feasible when the economy turns.
That's not a bad run rate for an $8 stock.
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.
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