Now that Bank of America has moved beyond mere investment speculation, proving itself a great way to play housing’s bottom and the financials’ full return, Cramer needed a similar trade with a bit more risk-reward. He thinks he found it in Huntington Bancshares.
Banks able to escape the worst-case scenario, being eaten from the inside by bad loans, offer tremendous upside right now. It wasn’t that long ago that many on Wall Street thought the might Bank of America was destined for nationalization, so an even darker fate was assumed for its smaller, regional cousins. But they, too, are starting to emerge from the doldrums, making them great prospects for speculation.
Huntington , which operates over 600 branches in Indiana, Kentucky, Michigan, Ohio, Pennsylvania and West Virginia, was one bank that Cramer thought wouldn’t make it. He wasn’t alone. A lot of people focused only on the company’s need to raise capital to cover losses, correctly predicting a coming secondary offering that inevitably would dilute the stock’s value. The secondary would also sink the earnings estimates, again hurting the share price.