Thursday, May 7, 2009
(Cont'd from above)...

Jim (cont'd):   

But sometimes it is not enough to know the fundamentals… you also have to know about stocks… that is what we talk about on Mad Money… and believe it or not, the industry is filled with people who do not have a clue about stocks… they just know business…. I have to know both… so even though this regional bank looked like it has some significant flaws, I invited Dennis Nixon, the Chairman, President and CEO of International Bank Shares on the show on March 30th… at the time, set the tableau… at the time the stock was at $7.36, and it had 8.55% yield… it was less than a point above its 52 week low… the shorts had been knocking the stuffing out of this stock over and over and over again… it was a beating and a lashing.

So I brought the CEO on, frankly I thought he was gutsy coming on… his bank had some flaws and he knew it, but I had to respect him for standing up to the shorts… as well as the vicious, but incisive, analysis at a place called Centron Research, which had pounded on International Bank shares… and continue to pound away… but I liked what the CEO had to say, I thought he defended himself well… but more important, I recognize that no matter how right the shorts might be about this or that particular being terrible… investors were simply too negative on the banks… they were way too negative on International Bank Shares at $7 and a 8.5% yield… so, I gave the stock my blessing… and I said it was a buy, buy, buy… which is a buy by the power of 14.

For all I know, the shorts were right about every single piece of data they had… see sometimes it does not matter to me… sometimes it cannot matter to you… why… because the stock is up 86% since I told you to buy it… 86% to $13.68, I call that nearly a double… and we are all convinced that the systemic risk has been taken off of the table, and people feel that it is safe to own banks again.

Now, how the heck does a bank that clearly has some problems and the shorts love to pick on, and simply does not have anything close to the best fundamentals nearly double in a short period of time… it is very simple… the shorts and the guys at Centron Research was focusing on how IBOC was not disclosing enough information about its business… how they thought that it did not have enough money set aside for loan losses… how it had made so many commercial and construction loans from 2005 and 2007... and $1.4b in real estate and construction loans were maturing within a year… and how poorly other banks were doing in the region… and how manage seemed to positive to believe… that is not what I care about… I care about making money.

There are times when you just have to look at the bigger picture… International Bank Shares with a fifth of its shares sold short, it was too hated… it was too hated… the stock was sold down too much because of excessive negativity… believe it or not, the reason that I liked the stock was precisely because the shorts could not stop talking about how much they hated it… this was a stock that was down from $35 to $7, at some point the negatives are just baked into the darn thing… you can not just keep on hating something for the same reasons over and over and over again, as the facts changed and the situations for the banks improved… and that is why I am not going to defend International Bank here tonight…I am not going to get caught up again in that fight between the longs and the shorts and the companies fundamentals.

I will not argue with the shorts about what kind of shape this company is in... I do not care… that is not the important thing to even be discussing… what you should care about is whether the stock is going lower or going higher… we have an 86% gain… that is what I am worried about… I am putting IBOC in the sell block tonight… not because of anything about the company… but because bulls make money, bears make money, and pigs get slaughtered… there is nothing more piggish than letting it ride after you get close to a double in any stock… to say nothing of one with less than stellar fundamentals… I am going to do what the shorts did not when they had IBOC by the throat at $7... I am going to step back… I am not pressing my bet… I am not pressing my luck.

Right now we would rather be in Texas Capital Bank Shares or Sterling Bank Shares when it comes to the Texas banks… they have better capital, better credit, better valuations… both just raised capital… Texas Capital paid back TARP already… Sterling never even took TARP… they are much more solid than IBOC… so I would take the proceeds that you just made on IBOC, ring the register… if you want to stay in banks in Texas, I would rather have you be in those two… there are a lot of other cheap bank stocks out there now too, including ones that I think you are going to find need to raise capital and you want to buy them

Or you know what, I like Huntington Bancshares Inc. (HBAN), I am freeing that from the Sell Block tonight… HBAN I sentenced in on June 19th, I put it in prison… it was more of a misdemeanor situation, it was more like 3 to 5 as opposed to life… it was $5.14, it is now down 24% since then… hey, I will take it… I have been relentlessly negative on this bank, even when I was at The Ohio State University, and just as the bears and the shorts should have known when to stop fighting International Bank Shares… I am done attacking Huntington… I might open an account there.

The situation for banks has gotten better period… and also this company seems to have changed under the leadership of Steven Steinour, the new CEO, who bought 300,000 shares on the open market not much lower than the current price… and seems to be more aggressive on problem assets, seems to be taking care of them… he worked at Treasury and the FDIC, I think he has got some friends in high places… does not matter, I think he is doing a great job… Huntington Bancshares is not the kind of stock that I want to bet against anymore.

Here is the bottom line…

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