Is BancFirst Corporation (BANF) A Good Stock To Buy?

Our research shows that the 15 most popular small-cap stocks among hedge funds have outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012, and they managed to return more than 144% over the ensuing 2.5+ years and outperformed the S&P 500 Index by over 84 percentage points (read the details here).

Hedge funds have been modestly bearish because BancFirst trades at a higher valuation than its peers.  With a price to tangible book ratio of 1.76, BancFirst trades at a higher price to tangible book ratio than the peer average of 1.4. With a forward PE of 15.60, BancFirst also trades at a higher forward PE than the peer average of 13. Because shares are a bit pricey, BancFirst’s stock might consolidate for another several quarters before rallying.

In the long run, BancFirst Corporation (NASDAQ:BANF) will be a good holding. The bank earns nice returns on capital, with a ROE of 10.9% and a ROA of 1%. BancFirst’s insiders and management also own half the bank. Because of the strong insider ownership, management will always do what’s best for the shareholder, meaning that BancFirst shares have a strong probability of outperforming its peers over time.

Disclosure: None