Buy, Sell, or Hold Regions Financial?
It's the end of the year and a great time to review the stocks that you own -- or might like to own.
Recently, I've taken a look back at how Regions Financial (NYS: RF) fared in 2011 as well as what investors should look out for in 2012. But when you put it all together, should investors be buying, selling, or simply hanging on to Regions' stock?
Let's take a closer look at the case for each.
Buy, buy, BUY!
As a value investor, I have a soft spot for cheap stocks. In fact, I've been known to dig all the way down into the bargain bin to find some of the ugliest, cheapest deals out there. And guess what? Regions falls into that category.
With a current price-to-book value below 0.4, Regions' stock looks seriously cheap. It's hardly alone in the banking sector -- other regional banks including Fifth Third Bancorp (NAS: FITB) , KeyCorp (NYS: KEY) , and SunTrust (NYS: STI) all trade below book value, as do big boys Citigroup (NYS: C) and JPMorgan Chase -- but it's a lower price tag than investors can find with most banks.
Additionally, there's a lot of upside potential for Regions. Between 2008 and 2010, the bank reported a combined loss of roughly $7 billion, while nonperforming loans as a percentage of the bank's total loans rocketed from 0.8% at the end of 2007 to 4.1% by the close of 2010. While that's pretty awful, it gives the bank plenty of room to improve if it -- and, more important, the economy -- gets its act back together.
Abandon ship: Sell!
There's not a lot of optimism about the banking sector, and that generally works against any sell thesis -- as long as investors are pessimistic about a certain industry, they're more likely to undervalue the stocks rather than overvalue them.
That said, there is still a lot to be concerned about. The economic picture in the U.S. has been stumbling in the right direction, but it's been stumbling nonetheless. Unemployment has remained uncomfortably high, and the housing market still has a very long way to go. In fact, a recent CBS News report focused on the housing demolition going on in Cleveland as foreclosed homes fall into disrepair and hurt the city's neighborhoods. And we can't talk risks to the financial industry without bringing up the mess in Europe.
While these risks may not add up to a wholesale meltdown of the U.S. banking system, they may be good reason for investors interested in banks to stick to higher-quality, less-damaged banks like BB&T (NYS: BBT) or M&T Bank (NYS: MTB) .
Hold it right there
And in the midst of all of this there's a case to be made for investors doing nothing at all with Regions' stock right now. For those who own it already, the bank is showing incremental improvements in its numbers and the stock is still cheap, so now may not be the best time to sell. At the same time, though, there are very real risks that the bank is facing and it's still not in great shape, so loading up on boatloads of the stock may not be prudent.
And in the end...
I'm caught between buy and hold on Regions. Banks in general are largely being shunned by investors, and the stock certainly looks cheap. However, with so many financials trading at bargain-level prices currently, I'm not convinced that Regions Financial is the one to go with.
That said, as many investors continue to look askance at bank stocks, many of the smartest in the game are jumping in. To read all about it, check out a free copy of The Motley Fool's new special report: "The Stocks Only the Smartest Investors Are Buying."
At the time this article was published The Motley Fool owns shares of Fifth Third Bancorp, Citigroup, KeyCorp, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.
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