Anthony Speciale Stock Market Analyst

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The Best Bank Stock Strategy for Big Returns

On Monday, we saw really serious selling come into the market for the first time in quite some time.

The action was blamed on a lot of things, including the Evergrande situation in China and the fight over the debt ceiling and spending bill in Washington, DC.

And if we’re counting on Congress to pass the spending bill and take care of the debt ceiling, or China to bail out Evergrande (it won’t), we might be in for a bit of a tough run.

You’ll see a lot of headlines as the week goes on, and people are going to start trading on fear.

But please don’t buy into that. If you really want to make a lot of money in the stock market, you need to learn to love the down days too. Fortunes are born in bad markets.

Now, here’s what I took away from the selling earlier this week.

Hedge Your Bets

First, if you’re trading in this market without a Black Swan hedging strategy in place, I think you’re making a huge mistake.

Adding a position in cheap, out-of-the-money options on the indexes offers a lot of protection if the market falls.

And if you had put such a trade on when I first mentioned this strategy back when the CBOE Volatility Index (VIX) was down around 15-16, you didn’t miss a beat on Monday.

Your options likely exploded upward in value, offsetting a lot of the losses from your stock holdings.

I don’t understand why more investors don’t do this. You put this on when the market’s extended and the VIX is low, and then you just sit back.

You’ll sleep better knowing if the markets do collapse, there’s a chance you’ll actually make a profit even though your stocks have lost value.

Banking On Big Returns

Second, if you really want to avoid all of this volatility, you really need to be using my small community bank stock strategy. There were not a lot of small banks that went down in price on Monday.

And all of the thrift conversions that I’ve been talking about over the past couple of months were up, some more than 5%, as money started to look for a place it could go, earn a higher return and not be subject to the insane volatility of the broader market.

There’s also the massive consolidation trend among small banks that’s just a natural tailwind. Small banks, in particular, remain in great financial shape, there’s lot of capital and loan portfolios are in magnificent shape.

This is the area of the market where legendary returns can be earned with very little volatility. I’ve been using this strategy for decades now, and it’s one of the highest-performing strategies I have ever seen.

Over the last decade, every single dollar to put into this small bank strategy is now worth $12… A return that would make even George Soros blush back in his heyday.

A New Mutual Thrift Conversion Play

So today, I have a new mutual thrift conversion play that you can take advantage of right now. It may be the very last one I give away for free.

The company is Texas Community Bancshares, Inc. (TCBS), a small bank out of rural Mineola, TX.

It went public about six weeks ago, and the stock has been moving up a bit. It’s now trading at about 88% of book value, but it’s still super cheap. The stock was up 5% on Monday.

Over the last decade, I’ve found maybe three Texas banks at a substantial discount to book value. This is the third, and the first two were already taken over for very large profits.

This is a great small bank, with very little problem loans and most of the loan book in single-family homes. From here, I think we’ll see them move into some commercial real estate and some other activities that raise the overall return.

The equity-to-assets measure, which is very important for how liquid a bank is, is up around 19 — about twice the national average for banks this size. Higher is better in this case.

So, the stock is cheap, the bank is strong, it’s in one of the more economically powerful states in the nation and the Dallas market is fantastic for banking.

There’s a restriction on a takeover that lasts for three years from the IPO, and I think the offers will start to come in immediately once that restriction is lifted.

This is just a very attractive franchise in a fantastic market that has a lot of appeal to a lot of other banks.

So, there it is. If you want to avoid volatility and earn excellent returns, stick with us. We’ll continue to show you how.