Monday, January 25, 2010

Limit Legislative Risk in Financials (BCBP) (STD) (MCY)

The financial sector is under great scrutiny from Washington being blamed for the recession and threatened with legislation. Below are three stocks who will either avoid any US legislation or are positioned to weather it better than other financials.

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BCB Bancorp, Inc. (BCBP) Price: 9.25

The basic structure of this company may hold more risk than other financial stocks, but the company has remained in the green during the current recession, has an attractive dividend yield over 5% and a low P/E of 7.9 vs. its five year average of 13.5. The stock is a small cap value stock and a local community bank that should be less affected by the Government.

The bank only has three locations in New Jersey and is a small community bank. If New Jersey’s economy performs worse than the rest of the US BCBP will more than likely perform worse than other more diversified financials.

Banco Santander SA ADR (Ticker: STD) Price 14.98


One way to diversify any legislative risk or avoid political vengeance in the financial sector is to buy financials outside of the US. Banco Santander is a financial institution located across the UK with its main concentration in Spain. STD has become one of the world’s largest financial institutions.

STD has had consistent revenue growth for the past 10 year even from 2007 through 2008 something that must large financial institutions failed to do. The company’s dividend yield is nearly 6% and P/S of 1.7 vs. five year average of 2.8

Mercury General Corporation   (MCY) Price: 37.49

With a 6.2% dividend yield, a property and casualty insurance stock may be a great way to invest to avoid upcoming legislation. The company has had consistent dividends but did suffer income losses in 2008 because of the economy. The stock is off to a slow start in 2010 down over 4% and was down nearly 15% in 2009. 

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