Sunday, March 10, 2013

"With the Dow crashing through new highs everyday, I felt like I needed to bring you a value pick this week with a good dividend. First Niagara Financial Group (FNFG)"

Dow Jones Industrial Average 14,397 (UP , and All-Time High Closing Price) Week ending 03-08-2013

Relax. This thing has a long way to go yet. Don't get scared because the Dow and market are at new highs. William O'Neill of Investor's Business Daily will tell you that you can't go higher until you first make new highs. 

Uncle Ben Bernanke has already telegraphed that he will not raise interest rates until unemployment gets down to 6.5%. That might not happen for another 2 -3 years. Technology is replacing jobs with machines as fast as companies are creating jobs!

Still, just to be cautious, I brought you a speculative value pick this week that does not fall into my normal Return on Equity and PEG ratio criteria. 

First Niagara Financial Group (Symbol FNFG, $8.35) is a bank that has 430 bank branches and has been a solid bank but that got involved in some acquisitions that kind of took them off the track. The "Net" of it is, they bought a bunch of branches from HSBC and sold a bunch of branches to KeyCorp. This caused a bunch of turbulence with the price of the stock. FNFG branches are located in New York, Connecticut, and Pennsylvania. Like banks, Susquehanna Bank and Fulton Bank, who have branches in the same area, trade for $11-12 dollars per share. 

My thesis here is that if you are patient, you will regain the 3 year total return of ( -37%) that had been lost plus gain the 3.83% dividend. That seems to me to be easily obtainable here. The PEG ratio on the stock is 1.58, so not too bad. The 5 year sales growth on the company has been 35.15%. Earnings per share for 2013 is projecting .74 cents per share and 2014 is projecting .80 cents per share.

This stock is what Warren Buffett would affectionately call a "Cigar Butt."  There is a lot of Value here and a good Margin of Safety. Oh, and did I mention that they have their name on a stadium in Buffalo, NY? Oh, and did I mention that they have a pretty good car loan business portfolio? Oh, and did I further mention that they are actually the 37th largest bank/bank holding company in the USA?

 So call me crazy, but I think this is a pretty good deal while you wait for the growth stocks that you like to come in a little bit so you can buy them. I am just keeping a watchful eye on Revenues to remain consistent. Winter is almost over and Spring is about to break out with this continuing stock market rally. I will keep an eye out for more bargains.


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