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One new rule of the post-financial crisis era is that bank 'bigness' does not reduce the risk of a bank stock investment. In fact, the opposite may be true, which is why I'm I'm reiterating my buy rating for First Niagara Financial Group (FNFG), first recommended on April 27, 2009, at a price of $13.55. First Niagara's stock has continued to meander since the spring buy call, but the value proposition remains the same: a community bank with few non-performing mortgages. Its residential loan portfolio, all in-house, is performing well. FNFG posted Q3 earnings per share of 7 cents, compared to the First Call Q3 EPS estimate of 13 cents.
Still, despite the Q3 earnings estimate miss, First Niagara registered solid loan and core-deposit growth, and in this era capital position is almost as important as earnings: FNFG's super-capitalized position means it has the resources to pursue prudent growth.
Hence, look on the recent sideways stock action with FNFG as an extended Buy opportunity. And given the likely U.S. economic recovery, those choice entry points for promising stocks won't be around forever. The First Call FY2009/FY2010 EPS estimates for FNFG are 46 cents to 85 cents.
Stock Analysis: First Niagara Financial Group is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in FNFG now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your FNFG position before December 2009. Sell/stop loss if you were to buy shares in this company: $6.20.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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