Jim Cramer on Huntington Bancshares Incorporated (HBAN): ‘Plenty Of Earnings Growth On The Horizon As Interest Rates Come Down’
We recently compiled a list of the Jim Cramer's Exclusive List of 9 YEV Stocks. In this article, we are going to take a look at where Huntington Bancshares Incorporated (NASDAQ:HBAN) stands against the other YEV stocks in Jim Cramer's exclusive list.
Recently, Jim Cramer sifted through the S&P 500 to identify stocks that satisfy his criteria: yield, earnings growth, and value. He explained the need behind the criteria:
“In a market with huge year-to-date gains, you got to get a little more selective about what you buy. Which is why I created this three-part test, also known as tripartite test.”
To navigate this market, he developed a three-part evaluation framework, which he refers to as the YEV test. Cramer explained that the first criterion focuses on yield, specifically seeking stocks that offer better returns than the current yield on the 10-year Treasury, which sits slightly above 4%. The second criterion is outsized earnings growth, meaning he looks for companies expected to exceed the 14% growth forecast for the S&P 500 next year. Lastly, Cramer seeks value, targeting stocks priced lower than the S&P 500, which currently trades at around 21 times next year’s earnings estimates.
“We want stocks with higher yields than the 10-year Treasury, meaning 4% plus. We want faster earnings growth than the S&P 500. In the aggregate, that's faster than 14%. And we want a price-earnings multiple lower than that of the overall S&P 500, which trades at 21 times next year’s earnings, which everybody says is a little elevated.”
While Cramer acknowledged that his criteria was challenging to meet, he successfully identified nine stocks that fit the YEV model. He noted that although the Federal Reserve has created a favorable environment for investors, resulting in substantial market gains, it is crucial to exercise caution when selecting stocks.
Observing the historical trends, Cramer pointed out that October has generally been a strong month for the market, yet he reiterated the necessity of being discerning in purchases. He encouraged viewers to consider these nine stocks as the top tier within the market. He went on to emphasize:
“Now, I want you to think of them as the elite of the elite. Not many companies can give you high yields, cheap stocks, and explosive earnings growth all at the same time... Here's the bottom line: in a market like this one, you do need to be selective, which is why we've fallen back on yield, on earnings and on growth and on value. Okay, now these are all things that are very hard to find right now.”
Our Methodology
For this article, we compiled a list of 9 stocks that fit Jim Cramer’s YEV stocks criteria and were unveiled during his episodes of Mad Money from October 7 to October 10. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A professional banker with a stack of mortgage papers and a pen in hand, ready to make the deal.
Huntington Bancshares Incorporated (NASDAQ:HBAN)
Number of Hedge Fund Holders: 32
Cramer talked about Huntington Bancshares Incorporated (NASDAQ:HBAN) and discussed that regional bank stocks ought to perform better in a “falling interest rate environment”. He also mentioned that he likes regional bank stocks presently. He noted that these banks faced significant challenges when interest rates were raised sharply and kept high.
“The economy is still pretty darn strong, to the point where calling it a soft landing feels too negative. Throw in falling interest rates and that's nirvana for the regional banks. And obviously, the credit losses will be less if we are in a cut cycle portion.”
Talking specifically about the company, Cramer expressed bullish sentiment about the stock.
“Next up, the Columbus-based Huntington Bancshares… the parent company of Huntington Bank, and a company, by the way, we know well. After speaking with CEO Stephen Steinour several times over the last couple years, I recommended this one in early August.
And when the whole market sold off hard after the yen carry trade fell apart, remember that fiasco? Since then, it's rallied nearly 11%. I felt comfortable recommending Huntington into weakness because we just had Steinour on the show less than a week before in the wake of a very healthy quarter. Steinour told a really positive story, saying that we're on the verge of a rate-cutting cycle. And after many banks spent last year on risk-weighted assets diets as they recovered from the crisis, that's mostly over now.
Listen to this, ‘We are incredibly well-positioned in the Midwest, and in addition, we've recently expanded in the Carolinas and a bit into Texas. So we have this unique franchise with a lot of growth potential. Columbus itself, our headquarters city, is doing phenomenally well. We've been growing deposits every quarter, we've grown loans and we're in a great position to continue to grow and frankly to help the economy and our customers.’
Again, terrific story. Even though Huntington has had a nice run since then, still got a 4.2% yield, plenty of earnings growth on the horizon as interest rates come down.”
Huntington Bancshares (NASDAQ:HBAN) is the holding company for The Huntington National Bank, which offers a wide array of banking services, including commercial, consumer, and mortgage banking, throughout the United States.
Recently, the bank announced an expansion into North Carolina and South Carolina, marking a significant step in its growth strategy. It builds on Huntington's 2023 Commercial Banking expansion in these states and further increases its existing customer base in the Carolinas, supported by the establishment of its regional headquarters in Charlotte.
As part of this expansion, Huntington Bancshares (NASDAQ:HBAN) plans to invest heavily in the Carolinas, aiming to add over 350 employees across various business lines and open approximately 55 retail branches within the next five years. This retail expansion portrays the company’s focus on increasing its footprint in several key markets, which also include Denver, Minneapolis, and Chicago.
Overall HBAN ranks 8th on Jim Cramer's exclusive list of YEV stocks. While we acknowledge the potential of HBAN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HBAN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.