By Gregg Greenberg TheStreet.com Staff Reporter 1/15/2008 3:27 PM EST Click here for more stories by Gregg Greenberg
Not all bank stocks are bad. In fact, some could make investors a lot of money this year. "There are regional markets to avoid like Florida and Arizona, where the housing exposure has led to recession," says Anton Schutz, portfolio manager for the $27 million Burnham Financial Industries fund. "But the Northeast did not suffer from that much overbuilding and is still in very good shape banking-wise."
Schutz's three favorite regional banks include two based in New Jersey, Investors Bancorp (ISBC - Cramer's Take - Stockpickr - Rating) and Hudson City Bancorp (HCBK - Cramer's Take - Stockpickr - Rating), and one located up I-95 in Connecticut, People's United Financial (PBCT - Cramer's Take - Stockpickr - Rating). The trio makes up almost 30% of the assets in the 22-stock fund, so there is no doubt that Schutz expects big things in 2008.
More importantly, Schutz is confident that these banks, unlike the money-center banks surrounding them, are subprime-free.
"All three are conservative lenders that have too much capital that can be deployed in new loans with better spreads," says Schutz. "There is no subprime exposure here."
Schutz's fund is only down 3.4% year to date, more than a full percentage point better than the S&P 500 and two percentage points superior to its Morningstar category benchmark. Over the last three years, the four-star fund has returned slightly over 7% annually, over five percentage points better than its Morningstar yardstick.