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.
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%.
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.
Nicholas A. Vardy