Tom Brown on Regions Financial
- Government “stress test” loss estimates are way too high. I’ve said this ever since the test results were released back in tk. Now, two quarters into the eight quarters the tests cover, and with high visibility into a third quarter, the tests’ excessive pessimism is more obvious than ever. None of the 19 big banks that were tested will come anywhere close to reaching the loss levels foreseen. Regions Financial, for example, predicts its cumulative losses in 2009 and 2010 will come in somewhere between $3.4 billion and $5.9 billion. Regions’ stress test forecast for same period: $9.2 billion. As I say, not even close.
Stone Fox Capital has had a small investment in RF for a while. The forced capital raise really hurt that position so its frustrating to see that test was flawed and casued a dilutive raise for nothing. At least that investment is recovering like the market. At one point just about everybody seemed convinced that RF was destined for bankruptcy.
With the pull back last week, the technicals are lined up the sweet buying spot. The 2EMA should officially cross the 200EMA on Monday making any pullback on the stock a must buy at prices above the 20EMA.