Most aren’t watching banks trading with market capitalizations under $100 million, but that’s where the real action might be over the next 6 to 12 months in the banking sector.
I just got off the phone with money manager Derek Plecki of Gator Capital Management in Tampa, Florida, who watches the banking sector very closely. He tells me that because of the recent crisis in the mortgage sector, the market has punished all banks, even those that have nothing to do with the crisis.
He tells me that the banks with market caps under $100 million have had dramatic drops in prices, and were hit at the end of 2010 with a second round of selling by investors taking tax losses. He says there are a huge bunch of these small cap banks, that are selling between 25% to 30% of book value, that are not part of the mortgage crisis at all and have no reason to be selling so low. He expects many of these banks will double or triple in price.
Given that Bernanke is pumping money out at a furious pace, we may have a dovetailing of events that could really propel these banks. Good luck digging.