Fool TV: Investing in Banks? Think Small!

For those who can't (or don't want to) view the video clip, scroll down to the transcript that follows.

Hi, this is Anand Chokkavelu, a senior editor here at The Motley Fool, and in today's "120," I want to tell you about the biggest opportunity in banks.

Now, you know, everyone's been talking about the big banks recently -- [Wells Fargo, Citigroup (NYSE: C  ) ], Goldman Sachs (NYSE: GS  ) , [JPMorgan Chase], Bank of America, what have you. But the real opportunity, I think, is in smaller banks. Why? Because big banks are really, really, really tough to really get a handle on. They've got a lot of things going on on their balance sheets.

Smaller banks? You can screen for them and then check them out -- and they've got simpler business models. I've found one that I really like, and I highlighted it to Foolish readers back in May of 2009. It's called Community Bank System (NYSE: CBU  ) .

When I screen, I look for good price-to-tangible book values, I look for low bad loans, and I look for conservative provisioning on those bad loans -- basically saying, "Hey, we're going to make sure that we've taken the hit up front, and that way you don't get surprises down the road."

Community Bank System, when I first talked about it back in May, had all those characteristics. It had never taken TARP funds, and it seemed to be very conservatively managed. It's in upstate New York, avoiding the housing bubble, for the most part. And the more I learn about it, the better it is.

I bought back in July, and one of the first things I received was an 8.5-by-11-inch little postcard that tells you everything you want to know about the business for that quarter. It gives you a rundown of what's happened; it gives you the statistics that will help you make sure they're still running the business as you want it to be run.

The one problem with this bank is that since I started talking about it almost a year ago, it's run up 50% to 60% -- which is good for us shareholders but bad for someone trying to get in on it. I would recommend that you add it to your watchlist and keep track of Community Bank System -- ticker: CBU -- and, until next time, stay Foolish.

For more from Fool TV:

Anand Chokkavelu owns shares of Community Bank System and Citigroup. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1144485, ~/Articles/ArticleHandler.aspx, 9/30/2014 6:22:44 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement