10 Best Bank Stocks to Buy According to Matthew Lindenbaum’s Basswood Capital

Published on October 21, 2022 at 5:59 am by Mohammed Saqib in Hedge Funds, News

In this article, we will discuss 10 Best Bank Stocks to Buy According to Matthew Lindenbaum’s Basswood Capital. You can skip our detailed analysis of Basswood Capital’s strategy and Matthew Lindenbaum’s background and go directly to 5 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 (NYSE:WFC), 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 (NYSE:COF), 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 (NYSE:COF) 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 (NYSE:COF). As per Insider’s Monkey database, 50 hedge funds owned stakes in Capital One Financial Corporation (NYSE:COF) at the end of the second quarter.

In addition to Capital One Financial Corporation (NYSE:COF), Basswood Capital had investments in JPMorgan Chase & Co. (NYSE:JPM), Webster Financial Corporation (NYSE:WBS), 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 (NYSE:FNB) 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 (NYSE:FNB) by 23% during the quarter.

On October 05, 2022, F.N.B. Corporation (NYSE:FNB) 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 (NYSE:FNB) 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 (NYSE:FNB) 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. (NASDAQ:TCBI) 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. (NASDAQ:TCBI) 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 (NYSE:WAL) 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 (NYSE:WAL) 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 (NYSE:WAL) 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 (NYSE:WAL). 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 (NYSE:WFC) 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 (NYSE:WFC) 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 (NYSE:WFC) 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.

Click to continue reading and see 5 Best Bank Stocks to Buy According to Matthew Lindenbaum’s Basswood Capital.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

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Should I put my money in Artificial Intelligence?

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Click to continue reading…

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