Should You Follow These Three Bank CEOs Who Gobbled Up Their Own Stock?

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CEOs of three regional banks bought stock of their companies last month.

This, coupled with the fact that bank stocks were strong in May, suggests that adding bank stocks to your portfolio now may be a good move.

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First Citizens Bankshare (FCNCA) is a regional bank headquartered in Raleigh, North Carolina. Its return on assets has been over 1.0% in the last four years. This is the area I love to visit.

The bank’s chairman and CEO, Frank Holding Jr., bought a bit of the stock last month for about $18,900. He owns 558,286 shares, which were worth about $381 million as of June 3. Robert Newcomb, a director, spent more than half a million dollars to buy First Citizen stock last month. Another director, Robert Hope, also bought some shares.

Shares of First Citizen sell for about 12 times earnings. This is attractive at a time when the S&P 500’s earnings multiplier is around 21.

Feather customer bancorpcubes
A father-son story unfolds in Reading, Pennsylvania. The father, Jay Sidhu, was the chairman and CEO of the bank for over a decade. He has customer stock worth about $68 million, but has been a seller since 2017.

Son, Samveer (Sam) Sidhu took over as CEO in July 2021. In his late 30s, he holds a bachelor’s degree from the Wharton School of the University of Pennsylvania and an MBA from Harvard Business School. He spent about $124,000 last month to buy 2,965 shares, bringing his stake to more than 80,000 shares.

Described by American Banker as “light on branches, heavy on technology”, the bank is a commercial lender on the Boston–Washington corridor and in Chicago. At four times earnings and 1.1 times book value, the stock looks cheap to me.

Based in Carmel, Indiana, Bancorp Merchants (MBIN) Every year for the past seven years has exceeded my return-on-asset guideline. CEO Michael Dury bought 4,500 shares last month, bringing his total shares to more than 12,000. The stock sold at six times the earnings.

dangerous turn

How much of your portfolio should be in bank stocks? Important to answer is the question of what will happen to the yield curve – that is, the spread between long-term and short-term interest rates.

Banks typically “lend for a long time.” That is, their loans typically last five years for a car loan, 20 or 30 years for a mortgage, and three to 25 years for a business loan.

Conversely, they “borrow less.” The money they lend comes from savings accounts, checking accounts and certificates of deposit. Customers can withdraw money into checking and savings accounts at will. Certificates of deposit usually range from three months to five years.

Therefore, banks care deeply about the yield curve. An inverted curve is terrible for them, as they may have to pay more to attract deposits than they can on the loan. Earlier this year, it looked like the yield curve could turn upside down.

It now appears that the curve may normalize, which bodes well for banks. But this is not a sure thing, as the long-term versus short-term spread is not very broad. So for now, I will not put more than 4% of my portfolio in stocks of banks.


This 62. IsRa The column I wrote about insider buying and selling. I can tabulate the results of 52 of them, all those that were written from 1999 to the year before.

My choice from a year ago was awful. tupperware brands you
74% as new CEO Fernandez Calero was unable to spark the turnaround I envisioned. container store group fell 43%. evergiEVRG
Performed well, went up 17%, but unfortunately I said I would buy it only on weakness.

For a long time, the results have been strangely mixed. The stocks I recommend on an insider buy basis have outperformed the Standard & Poor’s 500 Total Return Index by 1.65 percentage points. The stocks in which I mentioned insider selling are 1.44 points behind the S&P.

In cases where I looked at inside buying but recommended avoiding the stock, the shares outperformed the S&P by an average of 24 percentage points. In cases where I looked at inside buys but made no recommendations or vague comments, the shares beat the S&P by 19 percentage points.

Keep in mind that the results in my column are hypothetical and should not be confused with the results I obtained for customers. Also, past performance does not predict the future.

Disclosure: I have no position in the shares discussed today, personally or for clients.

John Dorfman is the president of Dorfman Value Investments LLC in Boston, and a syndicated columnist. His firm or clients may own or trade the securities discussed in this column. he can be reached here [email protected],

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