Friday, March 30, 2012

MOFG: Regional bank

MidWestOne Financial Group Inc. (MOFG) operates banks in 15 counties in central and east-central Iowa. The company is headquartered in Iowa City.

So, regional bank, doing bankly things, part of the regional banking sector, which is something of the flavor of the month when it comes to financial companies. The idea is that the regionals were more conservative during the bubble years prior to the recent recession, and so are in much better shape than their larger cousins to profit from the recovery.

MidWestOne had the most bullish chart among 19 stocks added today to the Zacks top-buy list.

On the chart, the most recent leg up began at $14.50 on Dec. 28, 2011 and has continued without a break up to today's high of $19.35. Notably, the stock weather Thursday's intra-day drop and recovery in the broad markets by skipping the drop part. The price came through unscathed.

The price today pushed to an all-time high, eclipsing the prior record set in 2008, when the company went public. Talk about bad timing: The price ended up down in the first month of trading, and stayed below its opening-month high for four grueling years.

Return on equity amounts to 8%, which puts MidWestOne in the tortoise column. Long-term debt amounts to 46% of equity, which is higher than I like but is actually fairly low for a banking company.

Institutitions aren't heavily invested in MOFG, owning just 19% of the shares. Even so, the price has been bid up to the point where it takes $2.57 in shares to control a dollar in sales.

Earnings have shown a steady rise since the end of 2010 with only two exceptions, the most recent being the most recent quarterly report.

The main point to be noted about MOFG is that it is small. Volume on average is only about 4,500 shares. Market capitalization is only $163.7 million.

It has no options. The half-hour intra-day chart shows some half hours where the volume is zero.

So this would be a shares only trade, and one only for traders who are able to tolerate low liquidity. This generally means traders who plan to be in the position for the long haul. And certainly, for traders willing to dig more deeply into the financial statements than I have done.

Decision for my account: I love the chart, and the financials are OK if a bit underwhelming. But I am not a long-term trader, and this stock is too illiquid for my taste. I shall pass on the trade.

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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