SunTrust Secondary Coming Sooner Than You Think
Web Editor, "Mad Money"
“There aren’t many giveaways in this or any market,” Cramer told viewers on Wednesday, “but every once in a while you stumble onto a pattern that’s about as close as it gets to free money with very little risk.”
One he has pointed out time again on “Mad Money” is the almost uniform run in bank stocks whose companies use a secondary offering to pay back loans to the Troubled Asset Relief Program. SunTrust Banks will hold its own secondary very soon, Cramer said, and he wants investors ready for it.
Just take a look at how these stocks have performed post-offering. More recently, there’s Fifth Third Bancorp , which is up 4 percent in not yet a week since its secondary last Thursday, Jan. 20. Huntington Bancshares has jumped 12 percent since its Dec. 13 share sale. First Horizon National sold new stock on the same day, and investors who got in then have collected 8 percent worth of gains.
Cramer thinks those are merely the beginnings of much larger moves, and he’s right if the returns seen in State Street and BB&T , which held their offerings back in May 2009 are any indication. They’re up 22 percent and 37 percent, respectively. Similar gains were seen in Comerica and Cramer fave PNC . And that’s to say nothing of larger banks like Goldman Sachs (up 31 percent), JPMorgan Chase (up 28 percent), Wells Fargo (up 30 percent) and Morgan Stanley (up 21 percent).
So what about SunTrust?
Judging from its most recent quarter, where all the key metrics—net charge-offs, nonperforming assets, early-stage delinquencies and loan-loss provisions—all showed improvement from the previous quarter, this bank is a lot further along in its recovery than anyone expected. That has Cramer thinking that SunTrust is next in line to pay back TARP. But the company will have to raise some money first. And while analysts predict that would happen in late March, Cramer said the quarter proves it could come much sooner, especially if the stock starts to edge higher.
“When it comes, it’s going to come quickly,” he said, “and you need to circle some. That’s Wall Street gibberish for putting in an indication with your broker, ASAP.”
What’s also great about paying back TARP is the virtuous circle it sets in motion through upgrades. Right now there are six “buys,” 16 “holds” and seven “sells” on STI, but a bank that’s no longer on a government leash should translate into more “buys” than just six. In fact, Cramer thinks that number could jump to 12 or more once the TARP debt is cleared.
So be ready. The larger brokers should be getting shares in the deal, and you don’t want to be left behind. Put in a request for STI’s offering first thing on Thursday, and you’ll have the best chance of getting in on the action.
When this story published, Cramer’s charitable trust owned JPMorgan Chase and PNC Financial.
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