$$ FOR YOUR HOLIDAY BANK ACCOUNT

Written by GSCR Staff   
Thursday, 14 November 2013 08:03

 

In our final Market Monitor blog for our week-long theme of anticipation for the upcoming holiday season we looked at our past picks for a sell, to help you, our loyal readers, raise some cash for presents, trips, or a nice self-indulgent treat.

 

 

Here is a great article we found on MarketWatch yesterday that summarizes a report from SNL Financial about the changing retail bank consumer to mobile and internet banking and the resulting closing and or lack of ‘business’ at many bank branches.

http://blogs.marketwatch.com/thetell/2013/11/12/new-report-says-bank-branches-are-shrinking-as-mobile-banking-takes-hold/

One of the key points made in the article is that this changing market trend may actually help banks balance the rising costs of new regulations from the Dodd-Frank law. With that said that, it will be important for banks to expend capital on IT technology to make the mobile and internet ‘branch’ enjoyable and issue free for the customer. Having clear differentiation from competitors in this area could drive new business, while having a substandard experience will drive customers elsewhere.

With this in mind we took a look at one of our few financial picks from early February this year, Jefferson Bancshares, Inc. (NASDAQ – JFBI - $6.25). JFBI is up 68% since this coverage on a slow steady climb. Take the money and run. It was a great trade but may not have longer-term prospects. Here is why.

As a refresher, Jefferson Bancshares is the operational holding company for Jefferson Federal Bank. It operates nine full-service branches and two drive-through limited service facilities located in four rural and suburban counties surrounding Knoxville, TN, providing deposit and loan services to consumers and businesses.

First, the long term trend toward a ‘cool’ online banking experience may be a detriment to regional banks like Jefferson. We poked around a little on the website and noticed that they just created a new phone app. The Company may not have the resources or the inclination to develop cutting edge technology here. The argument being that the competitive advantage that regional banks have over large national banks is the personal, local touch. While this serves them well with older demographics, it does not favor them going forward.

Second, back in February we liked the stock as a potential takeover target with a good turnaround story from a margin standpoint. The stock was a good deal at the time, but has doubled in price and now carries a market-cap to close to the $40 million level, which is a hefty price tag for a company that had top-line revenue of just $21 million last year.

Like any other regional bank, mortgages are a large part of the annual income for Jefferson. Interest rates have begun to climb which could hurt the re-finance and new loan business. Also, the local Tennessee real-estate market is a mixed bag at best for 2014. According to the Realty Times, Knoxville area homes were not hyper-inflated at the start of the housing crisis, therefore did not suffer the huge drop seen around the rest of the country. This could hold back first time homebuyers looking for value.

JFBI was a nice surprise for how thinly traded the stock is, averaging about 4,000 shares per day over the last three months. With virtually no investment bank or research coverage and with the factors mentioned above, we say count your blessings and take the cash.
 

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS   INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

For more information, visit our Disclaimer: www.goldmanresearch.com

Add comment
  • No comments found