December 3, 2012
Every investor should understand the bearish arguments and red flags of the companies they're interested in. Austin Smith talks with Anand Chokkavelu about reasons why you should stay away from Regions Financial (NYSE: RF).
Anand points out that when it comes to banking, the company needs to show a history of positive results. That's why you see banks like Wells Fargo and US Bancorp trade at a premium to banks like Regions Financial. In contrast to Regions Financial, these banks have done well in the past and aren't in a turnaround situation. What went wrong with Regions Financial?
The company tripled their size via two mergers between 2004 and 2006 -- obviously not the best time to be expanding. As a result of those mergers, with poor timing and poor management, Regions Financial experienced four straight unprofitable years from 2008-2011. To put into context, there are banks that went through the financial crises without one quarter of unprofitability. Regions Financial took TARP money from the U.S. government during the financial crises in 2008, which was common for banks at the time, but didn't pay it back until this year. Some of these red flags are too significant to ignore.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether Regions Financial is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!