It was a largely flat week for the market last week.
While the Dow has gone on a win streak not seen in over five years, both the Nasdaq and S&P 500 finished relatively flat.
This is not something to worry about.
The Nasdaq in particular, had gotten a little overextended, so a pullback is only natural.
And the fact that momentum has shifted to the Dow instead is a sign of healthy rotation – something that’s necessary if you want to sustain a bull market.
So, nothing to worry about.
The Fed meets this week and is widely expected to deliver a 0.25% hike.
I believe that has already been priced in and will not have much impact on the markets – meaning many stocks could still see big surges this week…
In particular, stocks from ONE specific sector.
Western Alliance Bancorporation (WAL)
WAL reported its Q2 earnings last week, and the data revealed that this regional bank has put the regional banking crisis firmly in the rearview mirror. It revealed a $3.5 billion increase in deposits – reversing the outflow it saw in the first quarter. It saw its book value per share rise by nearly 20%, and it saw a 53% rise in earnings per share on a quarterly basis (though it was still down on a yearly basis).
As a result, WAL stock has been surging – rising by 22% over the past week. But with the stock still down 17% on the year, there could still be much further room to run as it attempts to recover.
ServisFirst Bancshares, Inc. (SFBS)
WAL isn’t the only regional bank that is seeing its shares fly after positive Q2 results. SFBS is another name that’s surging – this time by a whopping 35% over the past week. This regional bank reported earnings last Friday, earnings which revealed an EPS surprise of over 10% compared to consensus estimates plus a 23% annualized growth in deposits.
Despite this 35% pop, SFBS shares are still down nearly 15% year-to-date. The regional banking crisis may be over – but that has not yet been reflected in the stock’s price. And that equals opportunity.
PacWest Bancorp (PACW)
What makes PACW different from the other two regional banking plays I shared above? The similarities are obvious, but there’s one key difference – PACW reports its earnings tomorrow, July 25.
This means that even though its shares have rallied by 20% in the past week – likely due to the other regional banks beating estimates. But that doesn’t mean PACW still can’t surprise, and for its shares to see another big pop after it reports earnings tomorrow.
To your wealth,
Felix @ Ace of Investing
