Despite many of our cities literally on fire, the NASDAQ and S&P 500 managed to close at post-coronacrash highs to start June; albeit, on subdued volume. Under normal circumstances, we’d say it’s confirmation of the current uptrend, but who knows what another night or two of chaos will do to stock prices.
Along with prices indicating the indexes should continue their ascents, our moment and market leadership models remain bullish. Our market type measuring stick remains in neutral but is inching towards a green light, as well.
Investors looking to ride the indexes higher, should Monday’s confirmation signals hold, might consider a S&P 500 exchange traded fund (ETF) like SPDR S&P 500 ETF Trust (SPY). It and the DOW have a lot of catching up to do with the NASDAQ if the markets fully recover COVID 19 losses.
If Wall Street does take a step back, we see initial support for the NASDAQ at 9,250, around 2,980 for the S&P and 24,750ish for the DOW.
SECTOR WATCH
Bank stocks made a big move last week, led by Regional and Community Bank stocks. On May 11th, we noted that insiders were buying shares in a major way. You can read more that article and more here: An Industry, Insider Buying Party, and a Pair of ETFs that could Benefit.
In the article, we highlighted iShares U.S. Regional Banks ETF (IAT) and First Trust NASDAQ ABA Community Bank Index Fund (QABA) as ETFs investors might use to have exposure to the regional and community bank shares. Of the two, IAT looks more attractive based on its chart.
Shares rallied sharply last week, sold off last Thursday and Friday, touched Friday’s low on Monday and rallied. If the ETF can close higher than $36, then it could rally to $40 in the near-term. In the other direction, iShares U.S. Regional Banks could attract buyers at $32ish.
STOCK WATCH
If we had to pick one of the regional bank stocks in IAT, First Horizon National Corporation (FHN) would be the one. Of the 58 companies in the portfolio, FHN offers one of the best combinations of value, dividend yield and low debt.
First Horizon Bank has 270 branches in 18 southeastern states. They recently announced a $0.15 per quarter dividend, which works out to a yield of 6.42% based on its current price of $9.49. (1) It trades at 0.634 times its book value of $14.96. Since 2015, the average price to book value (P/B) for the bank is 1.28, more than twice today’s valuation. FHN is also discounted based on its average five-year price to sales ratio (P/S) of 2.75. Today, Wall Street is paying 1.66 times sales. Meanwhile, it has one of the lowest debt to equity ratios in IAT at 16%. (2)
Analysts place a consensus 1-year target price of $11.08 on First Horizon National Corporation (FHN). In the last 52-weeks it has traded as high as $17.42 and as low as $6.27.
Please stay safe and may all your longs go up and your shorts go down.
Rich Meyers
InvestingTrends.com
