Regional banks have been in the spotlight after the collapse of SVB Financial SIVB last week. Many of the regional bank stocks began Monday trading down by double digits. A stock previously recommended by Jim Cramer is among the biggest decliners, and another favorite of his from 2023 is among the collapsed banks.
What Happened: Silicon Valley Bank, a unit of SVB Financial, collapsed and was taken over by regulators last week.
Over the weekend, Signature Bank SBNY was also closed by regulators, marking the third-biggest banking failure in history.
What do the two bank stocks have in common?
They were both recommended buys from CNBC host and television personality Jim Cramer in the last year.
In April, Cramer had several shows that discussed stocks that fit into the GARP category, or growth at a reasonable price. The spotlight came as growth at any price, or high growth stocks, had fallen due to economic concerns.
“The market wants something different,” Cramer said.
Looking at the financial sector, Cramer identified four stocks, with Signature Bank ranking as his top pick.
“Tonight we’re identifying GARP in another group that should thrive in this environment, the financials, one of the few industries that benefits directly when the Federal Reserve raises the interest rates.”
Cramer said there was an opportunity created to run towards bank stocks with GARP that have been underappreciated.
“Let’s start with number one, let’s start with Signature Bank.”
Cramer highlighted Signature Bank being a New York-based commercial bank that was oriented towards business banking and has 36 private client offices in states like New York, California and North Carolina.
Cramer said the bank focuses on the wealthy, a segment that can generate a lot of money for the institution.
The CNBC host said he recommended the stock earlier in 2022 and told viewers to look for a better entry point, something they've been offered as the stock was down 17% since the initial call.
Shares of Signature Bank closed at $268.69 on April 12, the day Cramer’s “Mad Money” episode aired.
The other three bank stocks recommended by Cramer in the April 2022 episode were State Street Corporation STT, Bank of New York Mellon Corporation BK and Charles Schwab Corporation SCHW.
Related Link: Regional Bank Stocks Getting Crushed Monday: Here Are 19 Stocks Down 10% Or More
Why It’s Important: In February, Cramer recommended shares of SVB Financial among the stocks up significantly in 2023 and could still be attractive to investors.
“I think the fears were not justified. Long term private equity, they’re not going away,” Cramer said.
Cramer called being a banker to the private equity sector an attractive business model.
“(The) stock’s still cheap. You could argue that SVB 40% up is barely a drop in the bucket.”
Benzinga also pointed to Cramer’s recent recommendation of First Republic Bank FRC as his “new focus.”
Cramer called First Republic Bank “a very good bank” in his tweets. Cramer highlighted the stock being in the $90s.
Shares of First Republic Bank are among the biggest decliners Monday, with shares down 60%.
While Cramer recommended both SVB Financial and Signature Bank, one short seller pointed to red flags for both stocks and warned investors.
Marc Cohodes correctly predicted the collapse of FTX, Silvergate Capital SI, SVB Financial and Signature Bank.
“The story is going to get bigger,” Cohodes said on a recent Twitter Spaces.
Cohodes highlighted bad guys laundering money and the connection to Signature Bank and the bank’s ties to the crypto sector.
“This is a worldwide money-laundering story.”
To take advantage of the stock recommendations of Cramer or to bet against them, two Cramer-themed ETFs were recently released by Tuttle Capital Management.
The Long Cramer Tracker ETF LJIM and The Inverse Cramer Tracker ETF SJIM were launched to give investors a way to go long or short Cramer's stock recommendations with “one-ticker” access.
“This is something that’s been years in the making,” Tuttle Capital Management CEO and CIO Matthew Tuttle told Benzinga in an interview.
When asked for comment on the recommendation of SVB Financial by Cramer, Tuttle said the consensus seems to be wrong a lot and Cramer recommends the true consensus.
“SIVB is just another example of the reverse Midas touch and why there is such a desire to bet against him.”
Tuttle said it might be unfair that Cramer has to swing at every pitch and give constant recommendations on tickers.
“You are betting against the idea that the consensus is usually wrong, and Jim is the consensus on steroids.”
Read Next: I Want You To Bet Against Me, Jim Cramer Calls Out New Inverse ETF
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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