Investors Attitude Toward Midwest Banks

April 16, 2008

Our other special focus this week is on Midwest Banks- a turbulent space to say the least. Analyst Peyton Green talked to us a little about how investors are feeling about the Midwest Banks space at this time:

Mr. Green: I think most investors look at the environment that has existed over the past decade and they say, “There is no way you can clear out the excesses that have occurred over the past five years in two quarters time.” The bad news tends to force the stocks lower over a longer period of time. When you see some good news come out, it tends to lead to short covering and catch-up buying (by those that are underweight bank stocks) and that causes a greater spike to the upside over a shorter period of time.

In our opinion that kind of pattern is not too inconsistent with past bear markets in bank stocks. What is different this time is that there is a whole lot more short interest across the space than there was. This increased activity by shorts has increased the volatility in almost every bank stock name that we cover.

For the complete interview with Mr. Green, including where banks are headed from his perspective and stock picks, click here.