Generally, conservative investors may want to stay away from regional bank stocks. While financial sector investments tend to be wise in arguably most circumstances, the sector crisis we incurred just a few months ago still weighs heavily. According to the AP in May, the banking industry still suffers from worrying stability concerns. Nevertheless, the red ink also presents contrarian opportunities for speculators.
For one thing, it’s possible (though I suspect not likely) that the Federal Reserve may engineer a gentle disinflation; that is, facilitating a slowed pace of rising prices without sparking a recession. Such an outcome will be almost miraculous given the horrible impact of the Covid-19 pandemic. Still, if you believe in Fed Chair Jerome Powell and company, investing in regional banks might make sense.
Also, from a basic level, it’s worth keeping an eye on speculative bank stocks to watch. Sure, the space may be suffering from credibility headwinds. Nevertheless, the regional banks represent the lifeblood of myriad small and mid-market communities. Therefore, you might be rewarded both personally and profit-wise with your hot-hand gamble.
National Bankshares (NKSH)
Based in Blacksburg, Virginia, National Bankshares (NASDAQ:NKSH) – which represents the parent company of multiple subsidiary brands – is a community bank operating from 25 full-service offices and one loan production office throughout Southwest Virginia. Not surprisingly, NKSH suffered under the weight of the crisis impacting regional bank stocks, slipping nearly 25% year-to-date. However, in the trailing year, it only lost about 3%.
Moving forward, intrepid speculators investing in regional banks may want to keep close tabs on National Bankshares. Primarily, the company benefits from a decent balance sheet. For example, it carries no debt, offering much flexibility during an ambiguous time. Also, its Piotroski F-Score lands at 8 out of 9, indicating high operational efficiency.
Also, National prints a three-year revenue growth rate on a per-share basis of 11.9%, above 74.63% of its peers. Its trailing-year net margin comes in at 42.71%, beating out 88.18%. Finally, the market prices NKSH at a trailing earnings multiple of 6.99, below the sector median of 8.39x. Thus, it’s an interesting idea among speculative bank stocks.
Headquartered in Oklahoma City, Oklahoma, Bank7 (NASDAQ:BSVN) is a bank holding firm that through its wholly owned namesake subsidiary operates nine full-service branches in Oklahoma, the Dallas/Fort Worth, Texas metropolitan area, and Kansas. Per its public profile, Bank7 focuses on serving business owners and entrepreneurs by delivering fast, consistent, and well-designed loan and deposit products to meet their financing needs.
An intriguing idea among regional bank stocks, BSVN obviously presents some market risk. Since the Jan. opener, shares slipped more than 10%. However, in the trailing year, they gained a hair over 6%. Regarding the financials, Bank7 should appeal to smart gamblers because of its no-debt profile. Also, it benefits from decent operational efficiency, as evidenced by the Piotroski F-Score of 7 out of 9.
In addition, the bank features a stout three-year revenue growth rate of 22.4%. Its free cash flow growth rate during the same period comes in at 39.3% while it also boasts a net margin of 42.3%. Lastly, BSVN trades at a trailing multiple of 6.51, again below the sector median of 8.39x. Thus, it’s one of the bank stocks to watch.
Oak Valley Bancorp (OVLY)
Arguably the most intriguing idea among regional bank stocks, Oak Valley Bancorp (NASDAQ:OVLY) may be a hidden gem. Since the start of the year, OVLY swung up nearly 9%. In the trailing one-year period, shares returned just under 42% of equity value. Following a consolidation period, it wouldn’t be surprising based on the technical profile that OVLY moves higher from here.
Based in California, Oak Valley operates through its subsidiaries with 17 conveniently located branches. Serving areas such as Sacramento and Modesto, Oak doesn’t quite grab national headlines. Arguably, though, it should given its zero-debt balance sheet. Plus, with a Piotroski F-Score of 8 out of 9, the financial enterprise commands strong operational efficiency.
Further, the company posts a three-year revenue growth rate of 12.1%, above 75.41% of its peers. And its trailing-year net margin stands at just under 40%, which outflanks 84.24% of the competition. In closing, OVLY trades at a trailing earnings multiple of 6.83. Per investment data aggregator Gurufocus, this stat ranks better than 65.35% of sector rivals. Thus, it’s a worthwhile idea for speculative financial sector investments.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.