Investing in a Regional Bank and Notching another Pair of Double-Digit-Percentage Gainers

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

U.S. stock markets closed a mixed week as markets consolidated their gains. The Dow finished 0.25% higher, the S&P 500 shed 0.65% and the Nasdaq closed essentially flat. Global markets fared worse than their U.S. counterparts, with the MSCI Emerging Markets Index falling by 2.82%.

Although all but one of your Bull Market Alert positions fell for the week, you booked a pair of double-digit-percentage gainers.

Allete Inc. (ALE) stopped out on Dec. 12 at $64.62 for a 10.93% gain. You also booked a 10.01% gain when you were stopped out of Take-Two Interactive Software, Inc. (TTWO) on Dec. 16

Recall that you also locked in a 10% gain in Masimo Corporation (MASI) with your stop price of $63.70.

All of your positions, with the exception of the MSCI Emerging Markets Index (EEM), are BUYS.

This week’s Bull Market Alert recommendation is yet another regional bank — a sector that has been soaring since the U.S. presidential election.

Wintrust Financial Corporation (WTFC) is a bank holding company with assets of approximately $25 billion. Through its 150 locations in the Chicago and southern Wisconsin area, Wintrust offers sophisticated technology and the resources of a large bank while focusing on providing personalized community banking to its customers.

And as the chart below confirms, Wintrust’s stock has been on a tear of late.

WTFC

Wintrust Financial Corporation (WTFC) versus the S&P 500 year to date.

And here’s why I expect Wintrust Financial Corporation (WTFC) to continue its strong run.

First, the big picture investment case for WTFC is a macroeconomic bet on the continued strength of U.S. regional banks. The two key earnings drivers for the banking sector — loan growth and interest rates — have improved markedly since a slowdown in Q3. Both commercial and industrial loan growth have rebounded sharply in Q4, leaping an annualized 5.5%.

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Second, soaring interest rates are benefiting bank net interest margins, lighting a fire under the whole regional banking sector.

Third, Wintrust’s financial results confirm this bullish trend. Over the past year, Wintrust’s total assets increased by 15% and now exceed $25 billion. Total loans increased by $927 million, or 20%, to $19.1 billion. Total deposits increased by $1.1 billion, or 22%, to $21.1 billion. Net interest income has also leaped ahead by $9.4 million, primarily as a result of earning assets growth.

Finally, Wintrust is a front-runner among the top-performing small-cap investment strategies of 2016. The stock also ranks very high on a range of short-term technical indicators that I follow closely.

So buy Wintrust Financial Corporation (WTFC) at market today, and place your initial stop at $61.50.

I am waiting for a pullback in the stock before I recommend any options on this play.

Finally, as this is the final issue of Bull Market Alert for 2016, I want to wish you and yours a Merry Christmas, Happy Holidays and a Happy and Prosperous New Year.

I will take my traditional holiday break next week and provide my next update on Jan. 3. I will plan to have the first Bull Market Alert recommendation of 2017 for you then.

Portfolio Update

Click here to view the Portfolio Update table.

Sincerely,

Nicholas Vardy

Nicholas A. Vardy

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