A Bundle of Buys in Banking


Q: Commerce Bancorp (CBH ) shares have fallen -- is it a good buy?

A: We think it's a great buy. In recent weeks the stock has been upgraded by three other analysts, but that's not the reason we like it. Our 12-month price target for the shares is $56. The reason we are so bullish is because in our view CBH is likely to continue to grow earnings at rates in excess of 20% annually in an industry where 8% growth is considered acceptable.

We believe that concerns over the effect of interest rates on the company's profitability are unjustified. Over the last approximately 26 quarters, CBH has either met or exceeded analysts' EPS estimates. We think this is a sign of a successful high-growth business model.

Q: Would you recommend Washington Mutual (WM )?

A: WM is on our buy list. We believe it's an above-average franchise. Its deposit base lacks commodity-like time deposits, which we think is positive. The shares were recently trading at about eight times our 2004 EPS estimate of $4.67 and are offering a 4.1% dividend yield, which in our opinion makes them an attractive investment. We would recommend that investors buy the shares of this highly profitable market leader.

Q: What are your other favorite buys at this point in time?

A: The financial-services buy recommendations consist of 18 names right now. Banks and thrifts include: AmSouth Bancorp (ASO ), Bank of America (BAC ), BankNorth Group (


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