{"id":13510,"date":"2023-05-25T05:19:24","date_gmt":"2023-05-25T09:19:24","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/huntington-bancshares-why-michael-burry-backed-this-bank-nasdaqhban\/"},"modified":"2023-05-25T05:19:26","modified_gmt":"2023-05-25T09:19:26","slug":"huntington-bancshares-why-michael-burry-backed-this-bank-nasdaqhban","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=13510","title":{"rendered":"Huntington Bancshares: Why Michael Burry Backed This Bank (NASDAQ:HBAN)"},"content":{"rendered":"
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Huntington Bancshares Incorporated (NASDAQ:HBAN<\/span>) is one of the largest regional banks in America – specifically operating across twelve states from its headquarters based in Columbus Ohio. This bank holding company operates through its subsidiary known as The Huntington National Bank that offers individuals alongside businesses with an array of banking services. As of March 31st of this year the company had amassed assets totaling $189 billion with deposits amounting to $145 billion whilst having provided loans worth $119 billion – rendering it as an impactful player within the industry.<\/span><\/p>\n

I will evaluate Huntington\u2019s stock based on its valuation, growth, profitability, and risk. I will also compare it to some of its peers in the regional banking sector. My main thesis is that Huntington is a buy recommendation, as it is trading at a discount to its intrinsic value, solid profitability, and a manageable risk profile. I will also discuss the best-in-class dividend and as always take a look at the challenges that could affect Huntington\u2019s performance and outlook in the near and long term.<\/span><\/p>\n

Investment Strategy<\/h2>\n

For starters, Huntington is right where I like it trading at just about 15% above its 52-week low. I added this to my investment strategy a number of years ago with great success. I’ll let famed investor Michael Burry explain its value:<\/p>\n

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“As for when to buy, I mix some barebones technical analysis into my strategy — a tool held over from my days as a commodities trader. Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That’s the contrarian part of me. And if a stock… breaks to a new low, in most cases I cut the loss. That’s the practical part. I balance the fact that I am fundamentally turning my back on potentially greater value with the fact that since implementing this rule, I haven’t had a single misfortune blow up my entire portfolio.”<\/p>\n<\/blockquote>\n

What does this mean?<\/p>\n

Now is the time to buy, as the stock trades at $10.53 at present.<\/p>\n

Second, this is a volatile holding heavily subject to economic conditions, the upcoming debt ceiling matter, and more.<\/p>\n

So what?<\/p>\n

An investment in Huntington should be a relatively small holding if you don’t plan to hold for a decade– and I don’t.<\/p>\n

Finally, I plan to hold onto this until it hits $15 per share.<\/p>\n

No more rhetorical questions. I will sell my shares when the company reaches my price target of $15. Got it?<\/p>\n

To think they told me I couldn’t be a comedian.<\/p>\n

Dividend Monster<\/h2>\n

One of the most appealing aspects of Huntington\u2019s stock is its generous dividend policy. The bank has been paying dividends consistently since 1990. The current annual dividend is $0.64 per share, which translates to a yield of 5.88% based on the current stock price of $10.53. This is well above the average yield of 2.9% for the regional banking sector and 1.66% for the S&P 500 index.<\/p>\n

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Not only is Huntington\u2019s dividend high, but it is also sustainable and growing. The bank\u2019s payout ratio, which shows how much of its earnings are distributed to shareholders, is 40%, which is above the industry average of 34% and within its own target range of 40% to 60%. This means that the bank retains enough earnings to reinvest in its business and support its future growth. The bank\u2019s free cash flow yield, which shows how much cash it generates relative to its market value, is 3.39% and indicates that the bank has more than enough cash to cover its dividend and other obligations.<\/p>\n

Huntington\u2019s dividend has also been growing at a remarkable pace over the years. The bank has increased its dividend at a compound annual rate of 10% over the past five years and 15% over the past 10 years. While I don\u2019t expect Huntington to maintain such a high dividend growth rate in the future, given the challenges posed by the low interest rate environment and the integration of TCF Financial Corporation, which it acquired in December 2022, I still believe that Huntington will continue to reward its shareholders with above-average dividend growth and returns.<\/p>\n

Profitability<\/h2>\n

<\/span><\/p>\n\n\n\n\n\n\n\n
Profitability Metrics<\/th>\nHBAN<\/th>\nIndustry<\/td>\n<\/tr>\n<\/thead>\n
Return on assets (ROA)<\/td>\n1.26%<\/td>\n0.98%<\/td>\n<\/tr>\n
Return on average equity (ROE)<\/td>\n13.92%<\/td>\n10%<\/td>\n<\/tr>\n
Net interest margin (NIM)<\/td>\n3.65%<\/td>\n2.97%<\/td>\n<\/tr>\n
Loan\/Deposit Ratio<\/td>\n82%<\/td>\n62%<\/td>\n<\/tr>\n<\/table>\n

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