In this article, we will discuss 10 Best Bank Stocks to Buy According to Matthew Lindenbaum’s Basswood Capital.
Matthew Lindenbaum is a General Partner at Basswood Capital Management. After getting an undergraduate degree from Brandeis University, Matthew began his career at Merrill Lynch Capital Markets, where he worked in the mortgage finance group. Shortly after that, he worked at SNL Securities, LLC, where he went on to become a General Partner. Matthew has over 35 years of industry experience and, over the course of his career, has served in various top positions, including serving as Vice Chairman of Community National Bank and Director at Garden State Bancshares.
Basswood Capital Management L.L.C. is an asset management company operating out of New York. The company, founded by Bennett Lindenbaum and Matthew Lindenbaum in 1998, now employs 15 people. The company, as of its Q2 2022 filing, manages 14 clients and a portfolio value of over $1.5 billion. The company invests in value stocks, primarily in the financial sector, as well as in fixed-income securities. The firm’s top ten holdings include Wells Fargo & Company, F.N.B. Corporation (NYSE:FNB), Comerica Incorporated (NYSE:CMA), and Webster Financial Corporation (NYSE:WBS).
Our Methodology
We picked the top 10 bank stocks from Basswood Capital’s portfolio as of its Q2 2022 filing.
Best Bank Stocks to Buy According to Matthew Lindenbaum’s Basswood Capital
10. Capital One Financial Corporation (NYSE:COF)
Basswood Capital Stake: $38,042,000
Percentage of Basswood Capital‘s Portfolio: 2.39%
Number of Hedge Fund Holders: 5
Capital One Financial Corporation (NYSE:COF) is a financial services holding corporation based in McLean, Virginia. Basswood Capital doubled down on its investment in Capital One Financial Corporation, adding to the stake by 166% during Q2 2022. The total investment of the fund in the company amounts to approximately $38.0 million.
David George, an analyst at Baird, on Friday, September 30, 2022, authored a research note to investors in which he added Capital One to his “Bullish Fresh Pick.” The analyst maintained that the company is trading at highly attractive valuation levels, and there is very limited downside risk on the stock from the current levels. He currently has an Outperform rating on the company’s stock with a target price of $130.
Here is what Davis Opportunity Fund had to say about Capital One Financial Corporation in its Q4 2021 investor letter:
The absolute level of revenues and profits generated by such companies is, in fact, so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Capital One Financial.
At the end of the second quarter, Fisher Asset Management had a total holding of 7,848,053 shares in the company making the fund leading stakeholder of Capital One Financial Corporation. As per Insider’s Monkey database, 50 hedge funds owned stakes in Capital One Financial Corporation at the end of the second quarter.
In addition to Capital One Financial Corporation, Basswood Capital had investments in JPMorgan Chase & Co., Webster Financial Corporation, and Dime Community Bancshares, Inc. (NASDAQ:DCOM).
9. F.N.B. Corporation (NYSE:FNB)
Basswood Capital Stake: $38,689,000
Percentage of Basswood Capital’s Portfolio: 2.43%
Number of Hedge Fund Holders: 20
F.N.B. Corporation is a financial services company providing a wide range of banking and investment management services. Matthew Lindenbaum reduced his exposure to F.N.B. Corporation by 23% during the quarter.
On October 05, 2022, F.N.B. Corporation issued a press release announcing that it has received clearance from regulators on its proposed merger with UB Bancorp (UBNC). The merger is going to benefit the company as it will increase the bank’s presence in North Carolina. After the completion of the merger, F.N.B. Corporation will have total assets of around $43 billion with $35 billion and deposits.
At the end of Q2 2022, 20 hedge funds in Insider’s Monkey database were bullish on F.N.B. Corporation stock, and Basswood Capital remained the leading stakeholder of the company with a holding of 3,562,503 shares of the company.
8. Texas Capital Bancshares, Inc. (NASDAQ:TCBI)
Basswood Capital Stake: $39,016,000
Percentage of Basswood Capital’s Portfolio: 2.45%
Number of Hedge Fund Holders: 19
Texas Capital Bancshares, Inc. (NASDAQ:TCBI) is a lending company providing specialized products to firms across the United States. Basswood Capital reduced its stake in Texas Capital Bancshares, Inc. during the second quarter by 18%. The fund has an investment value of approximately $39 million in the company’s stock.
On September 14, 2022, Jeniffer Demba, an analyst at Truist, increased her target price on the company’s stock to $68 from the previous $65 while maintaining a Buy rating on the stock. The analyst is bullish on the stock as she believes that the bank’s profitability will improve going forward as a result of aggressive interest rate hikes by the US FED.
As per Insider’s Monkey database, 19 hedge funds were long on Texas Capital Bancshares, Inc. shares at the end of Q2 2022, and Citadel Investment Group reported the highest holding of the company’s shares with a total value of over $41.7 million.
7. Western Alliance Bancorporation (NYSE:WAL)
Basswood Capital Stake: $45,512,000
Percentage of Basswood Capital’s Portfolio: 2.86%
Number of Hedge Fund Holders: 35
Western Alliance Bancorporation (NYSE:WAL) is a holding company providing banking and advisory services to clients in the United States. Matthew Lindenbaum decreased his investment in Western Alliance Bancorporation by 14% during the second quarter of 2022 and held 1,269,548 shares of the company as of the end of the June quarter.
Steven Alexopoulos, an analyst at JPMorgan, currently has a Neutral rating with a target price of $85 on Western Alliance Bancorporation shares. The analyst believes that the company can deliver high returns to investors during periods of economic growth, but for now, since the outlook of the credit market remains uncertain, he believes that the shares of the company will perform at par with its peers.
Here is what ClearBridge Investments SMID Cap Growth Strategy has to say about Western Alliance Bancorporation in its Q4 2021 investor letter:
Another new addition was Western Alliance Bancorp (WAL), an Arizona-based community lender. WAL maintains our banking exposure as we have begun to exit SVB Financial due to capitalization. WAL has made a number of strategic niche acquisitions in the past decade and continues to demonstrate above-industry loan growth and good credit metrics.
During Q2 2022, Basswood Capital turned out to be the hedge fund with the largest stake in Western Alliance Bancorporation. The fund, as of the end of the June quarter, held 644,646 shares of the company with a total value of approximately $45 million.
6. Wells Fargo & Company (NYSE:WFC)
Basswood Capital Stake: $49,728,000
Percentage of Basswood Capital’s Portfolio: 3.12%
Number of Hedge Fund Holders: 83
Wells Fargo & Company is one of the biggest banks in the United States, providing consumer, commercial, corporate, and investment banking services across the country. Basswood Capital’s exposure in Wells Fargo & Company amounts to a total value of over $49 million as of its reported filing for the period ending June 2022. The fund decreased its holding of the company’s shares by 24% during the previous quarter.
On September 12, 2022, Matt O’Connor, an analyst at Deutsche Bank, reduced his price target on the company’s stock to $60. Although the analyst has maintained a Buy rating on the company’s stock, he believes that the chances of a recession are increasing, which will possibly cause more downside in the market, including stocks in the banking sector.
Here is what Davis Opportunity Fund has to say about Wells Fargo & Company in its Q4 2021 investor letter:
The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.
5. Comerica Incorporated (NYSE:CMA)
Basswood Capital Stake: $50,380,000
Percentage of Basswood Capital‘s Portfolio: 3.16%
Number of Hedge Fund Holders: 38
Comerica Incorporated is a financial services firm with a special focus on commercial banking. Basswood Capital decreased its stake in Comerica Incorporated by 5% during Q2 2022 and held 686,558 shares of the company as per the last filing of the fund.
On September 30, 2022, David Chiaverini, an analyst at Wedbush, initiated coverage of Comerica Incorporated with a price target of $95 and an Outperform rating. The analyst believes that a large amount of the bank’s deposits are non-interest-bearing, which will bode well in terms of boosting the profitability of the bank.
Marshall Wace LLP remained the most bullish hedge fund on Comerica Incorporated as it increased its stake by 339% during the second quarter of 2022. The fund holds 2,109,435 shares of Comerica Incorporated with an investment value of over $154 million.
4. U.S. Bancorp (NYSE:USB)
Basswood Capital Stake: $53,018,000
Percentage of Basswood Capital‘s Portfolio: 3.33%
Number of Hedge Fund Holders: 43
U.S. Bancorp (NYSE:USB) is a financial services corporation providing services including commercial banking, retail banking, mortgages, etc., mainly in the Western and Midwestern United States. Matthew Lindenbaum didn’t make any changes to his stake in U.S. Bancorp during Q2 2022. The fund held 1,152,063 shares of the company at the end of the second quarter ending June 2022.
On October 14, Vivek Juneja, an analyst at JPMorgan, reduced his price target on U.S. Bancorp to $46. The analyst currently has an Overweight rating on the company but has reduced his price target on the stock as he believes that the rising interest rates pose the risk of a recession and a slowdown in loan growth for the bank.
Here is what ClearBridge Investments Dividend Strategy has to say about U.S. Bancorp in its Q4 2021 investor letter:
Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.
According to Insider’s Monkey database, 43 hedge funds owned stakes in U.S. Bancorp at the end of Q2 2022, while Berkshire Hathaway remained the hedge fund with the largest holding in the stock. The fund owned 119,805,135 shares of the company at the end of Q2 2022.
3. JPMorgan Chase & Co. (NYSE:JPM)
Basswood Capital Stake: $55,292,000
Percentage of Basswood Capital’s Portfolio: 3.47%
Number of Hedge Fund Holders: 104
JPMorgan Chase & Co. is one of the biggest financial corporations in the United States. The company primarily focuses on corporate banking, investment banking, commercial banking, and community banking. Basswood Capital didn’t make any changes to its stake in JPMorgan Chase & Co. during Q2 2022 and held on to its stake of 491,000 shares of the firm.
On Friday, September 30, 2022, JPM’s execs, in an interview, stated that the company plans on hiring 2,000 engineers through the end of 2022. The continuation of hiring by the bank reflects its strength during a period of slowing economic growth.
Here is what Carillon Tower Advisers had to say about JPMorgan Chase & Co. in their Q1 2022 investor letter:
More cyclical sectors, including technology and consumer discretionary, were among the weakest, likely due to rising interest rates and inflation. It was encouraging to see the quarter finish on a strong note with the S&P 500 only about 5% away from its all-time highs. Shares of JPMorgan Chase (NYSE:JPM) detracted from performance due to the company’s increased expense guidance, announced in January.
Fisher Asset Management remained the hedge fund with the largest holding of JPMorgan Chase & Co. stock at the end of Q2 2022, amounting to a value of over $899 million. As per Insider’s Monkey database, 104 hedge funds were long on JPMorgan Chase & Co. at the end of the June quarter.
2. Webster Financial Corporation (NYSE:WBS)
Basswood Capital Stake: $64,949,000
Percentage of Basswood Capital’s Portfolio: 4.08%
Number of Hedge Fund Holders: 32
Webster Financial Corporation is a diversified financial service provider operating in the United States. The company offers mortgages and consumer and commercial banking services to its clients. Matthew Lindenbaum added to his investment in Webster Financial Corporation by 21% during Q2 2022. The fund now holds 1,540,896 shares of the company as per its last filing.
The shares of Webster Financial Corporation have not performed well in 2022 and are down 14.91% YTD as of October 20, 2022. The bank had a good Q3 2022, as it reported a revenue of $664.6 million for the quarter, beating market estimates by $23.98 million. The normalized EPS was also ahead of estimates by $0.04, as the bank posted an EPS of $1.46 for the quarter.
Here is what Diamond Hill Small Cap Fund has to say about Webster Financial Corporation in its Q1 2022 investor letter:
Webster Financial Corporation is also a new name in the portfolio, having completed its merger of our prior holding Sterling Bank. The combination means that Webster’s large health care savings (HSA) account platform, which is a good source of low-cost deposits, will be paired with Sterling’s organic loan generation engine.
At the end of the second quarter of 2022, 32 hedge funds in Insider’s Monkey database held stakes in Webster Financial Corporation. Diamond Hill Capital had the biggest stake in Webster Financial Corporation, amounting to approximately $135 million.
1. Dime Community Bancshares, Inc. (NASDAQ:DCOM)
Basswood Capital Stake: $88,790,000
Percentage of Basswood Capital‘s Portfolio: 5.58%
Number of Hedge Fund Holders: 9
Dime Community Bancshares, Inc. is an investment holding company. The company’s deposits are gathered from the internet and invested in several sectors including real estate and debt securities. Basswood Capital decreased its stake in Dime Community Bancshares, Inc. by 12% during the second quarter. The fund’s holding in Dime Community Bancshares, Inc. amounts to a value of over $88 million as per its Q2 2022 filing.
On September 21, 2022, Dime Community Bancshares, Inc. announced a quarterly dividend of $0.24/share. The company has a strong history of paying dividends and currently has a good dividend yield of 3.07%. The bank’s stock is currently down 12.12% YTD as of October 20, 2022. Dime Community Bancshares, Inc. is set to announce Q3 2022 earnings on October 28, 2022.
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This article is originally published at Insider Monkey.
