BID® Daily Newsletter
May 5, 2017

BID® Daily Newsletter

May 5, 2017

Community Banks - Good Investment


A study released last year found that using virtual reality and non-invasive brain-machine interfaces allowed subjects who were paralyzed to regain touch sensation and some voluntary control of muscles in their legs. Think about that for a moment. In the experiments, subjects used a brain-controlled exoskeleton and virtual reality to actually walk! This is an amazing breakthrough that could perhaps one day help the 1 in 50 Americans (and millions of others worldwide) who are paralyzed to regain greater mobility. Wow.
While not nearly as amazing or potentially life changing as this breakthrough, community bank investors play an important role in the banking industry.
Some small and micro-cap investors may overlook community banks, leaving many pink sheet players trading for lower multiples, but with lots of room for upward movement.
Community bank stocks offer significant benefits for investors. For starters, given their need to comply with stringent regulations, community bank stocks are easier than many other small-cap stocks to value, according to experts. Like the basic business model of any bank, community banks generally take in deposits and lend out money. That is a simple business model and investors like clarity.
In addition, community banks are often under-valued. While they may not receive the attention of larger financial institution investors, many small- and micro-cap community banks are gradually and steadily making significant headway in their own markets and could provide opportunity.
Community bank annual reports also do not typically offer the vibrant story of a similarly sized startup in another sector perhaps, so that too can impact investor interest. Some investors may gloss over community banks entirely as banking can be seen as a sleepy industry at times.
Also, as many community banks lack an investment relations team or have it only lightly staffed, the accomplishments of even the most successful community bank could go unnoticed.
Yes, even in these rocky times a number of community bank stocks are growing their bottom lines at a double-digit rate that should impress even the most skeptical investor.
On another front, industry consolidation also plays a factor for investors. Some investors are willing to do their due diligence and seek out community banks that are growing their loan book, while others seek banks that have low-cost structures.
Truth be told, while the very largest banks took a hit following the financial crash, publicly traded community banks have been a relatively safe bet. Certainly things can and do change and the past is no predictor of the future, but at least it gives us hope.
Industry experts point out that if Dodd-Frank Act regulations are eased by the Trump Administration, more successful community banks could see their earnings rise perhaps by as much as 30%.
To be sure, many community banks could be a valuable addition to the portfolio of the investor community. So, to appeal to investors, make sure you have an impactful story to tell and keep telling it as you grow and perform.
As any other stakeholder, investors too need to know that you have their interest at heart with your plans for progress and are indeed progressing. It takes effort to draw the attention of investors who are often seeking the next reality out there, but it could be well worth it.
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