Flagstar Bancorp Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Don't look now, but shares of regional banker Flagstar Bancorp (NYS: FBC) fell as much as 24.5% overnight on more than ten times the average trading volume.

So what: Yes, the stock also plunged more than 12% yesterday -- not a good week by any measure. Yesterday's drop came from disappointing quarterly results; the encore rides on one analyst downgrade and another target-price cut.

Now what: When fellow Fool Anand Chokkavelu invested some real money in a basket of regional banks last week, he used Flagstar as an example of what not to buy next to peers Synovus (NYS: SNV) , Hudson City Bancorp (NAS: HCBK) , and Cathay General (NYS: CATY) . He saw a glut of bad loans on Flagstar's docket next to a terrible return on equity, and not even a tiny dividend to ease the risky pain. The events of this week have proven Anand right. Those bad loans really do hurt, in case you missed that lesson from the financial panic of 2008.

Interested in more info on Flagstar Bancorp? Add it to your watchlist.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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