Go Small, Go Regional

 | Jan 20, 2012 | 1:00 PM EST  | Comments
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Stock quotes in this article:

egbn

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tcbi

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ozrk

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homb

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mktx

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gs

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gs

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jpm

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wfc

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bac

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ms

Financials have been in the spotlight, as big banks such as Goldman Sachs (GS), JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC) and Morgan Stanley (MS) reported in recent sessions.

While these widely traded issues get the lion's share of attention, many smaller regional banks have been quietly building up fundamental and technical strength.

One stealth name is Eagle Bancorp (EGBN), a community bank with which runs 15 branches in Maryland, Virginia and Washington, D.C. The company reports its fourth quarter next Wednesday, after the market closes. Analysts expect income of $0.32 a share and revenue of $28.8 million. The bank is expected to show double-digit earnings growth this year, to $1.34 a share.

The chart initially got my attention, as the price has rallied to four-year highs after emerging from a price consolidation earlier this month.

Another small bank that's performing well is Texas Capital Bancshares (TCBI), which also reports its fourth quarter on Wednesday. Wall Street expects it to earn $0.60 a share with revenue of $82.5 million.  Fundamentally, the company has amassed a solid history of earnings and revenue growth, and it's expected to post strong results this year.

The stock pulled back from a Jan. 10 intraday high of $33.23, but is continuing to hold up nicely above key moving averages. The current consolidation below the Jan. 10 high could result in a new entry point in the coming days or weeks.   

Bank of the Ozarks (OZRK) is a Little Rock, Ark.,-based regional bank with more than 100 branches in the Southeast and Texas. The company reported its fourth quarter on Jan. 17, beating earnings views by $0.02 per share. The stock pulled back slightly after earnings, but it's showing continued strength above its 10-week line. It's currently out of the technical buy range, but is worth watching for its next pullback that could offer a new entry opportunity.

Another small Arkansas bank, Home BancShares (HOMB), also sports fundamentals and technicals that are superior to many of its larger, widely held brethren.  As with some other regionals, Home BancShares is thinly traded, moving only 78,000 shares a day, meaning there's extra volatility risk, something individual investors need to remain aware of.

The company reported earnings Thursday, beating views by $0.02 per share. The stock is continuing to hold up above its 10-week average. Like many financials, even small ones, Home BancShares pays a dividend. Its yield is 1.2%.

Another financial that's been on my radar for some time is MarketAxess Holdings (MKTX). This is not a regional bank but an electronic-trading platform for broker-dealers and other institutions.

On its chart, the stock has been trending higher, above its 10-week line, but hasn't formed a bottoming consolidation since mid-2010. Extended rallies occasionally mean the stock is due for a pullback. Investors going into this stock would need to be very vigilant for action such as heavy-volume declines beneath its 50-day line.

MarketAxess is expected to report earnings in early February, so price and volume action around that time is something to watch.

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