Buy These Regional Banks on Strength in Housing
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The performance of banking sector stocks are significantly correlated to the strength of the housing market, notes analysts at Keefe, Bruyette & Woods Equity Research.
Considering that the national housing market is still fragmented, with some regions showing significantly more strength than others, KBW analysts are recommending specific regional banks: CoBiz Financial Inc (NASDAQ: COBZ), Seacoast Banking Corp. of Florida (NASDAQ: SBCF), Western Alliance Bancorporation (NYSE: WAL).
The stocks listed above are regional banks with exposure to housing in Denver, Phoenix and south Florida. According to data out Case-Shiller, home price trends in these areas are improving at the fastest rate.
"The housing market and the market for bank stocks have moved more or less in parallel since 2007," wrote a KBW analyst.
"Banks stocks and homebuilder stocks have also trended together. Looking forward, we believe that there are signs of a housing recovery in specific regions, although we expect only modest recovery in the national market. As a result, we believe investors in regional banks can profit from emphasizing banks in regions where housing is showing signs of recovering, even if those banks do not have a concentration in residential real estate lending."
While KBW is recommending specific bank stocks, more broadly investors can gain exposure to the bank sector with ETF PowerShares KBW Bank (NYSE: KBWB), which tracks the KBW Bank Index. For exposure to housing, investors should consider ETF SPDR S&P Homebuilders (NYSE: XHB).
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Considering that the national housing market is still fragmented, with some regions showing significantly more strength than others, KBW analysts are recommending specific regional banks: CoBiz Financial Inc (NASDAQ: COBZ), Seacoast Banking Corp. of Florida (NASDAQ: SBCF), Western Alliance Bancorporation (NYSE: WAL).
The stocks listed above are regional banks with exposure to housing in Denver, Phoenix and south Florida. According to data out Case-Shiller, home price trends in these areas are improving at the fastest rate.
"The housing market and the market for bank stocks have moved more or less in parallel since 2007," wrote a KBW analyst.
"Banks stocks and homebuilder stocks have also trended together. Looking forward, we believe that there are signs of a housing recovery in specific regions, although we expect only modest recovery in the national market. As a result, we believe investors in regional banks can profit from emphasizing banks in regions where housing is showing signs of recovering, even if those banks do not have a concentration in residential real estate lending."
While KBW is recommending specific bank stocks, more broadly investors can gain exposure to the bank sector with ETF PowerShares KBW Bank (NYSE: KBWB), which tracks the KBW Bank Index. For exposure to housing, investors should consider ETF SPDR S&P Homebuilders (NYSE: XHB).
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