A Form 4 filed with the SEC has disclosed that Richard King, a member of M&T Bank Corporation (NYSE:MTB)’s Board of Directors, directly purchased 1,250 shares of stock on March 12th at an average price of $104.17 per share. He now owns close to 18,000 shares of the stock. M&T Bank is a regional bank holding company concentrated in the mid-Atlantic region. Our database of insider trading filings shows that King had most recently bought shares at two points in August 2011: early in the month, when the stock was at about $80, and then at prices close to $70 towards the end of the month. M&T is up about 20% since the first of those purchases, about even with the market. Insider purchases are often considered bullish signals because the insider in question should be particularly confident in the company in order to ignore the benefits of diversification, and studies generally show a small outperformance effect. Read our analysis of studies on insider trading.
M&T Bank Corporation’s earnings rose 20% last year compared to 2011, buoyed by a particularly strong improvement in Q4 2012 relative to a year earlier. This is the result of a rise in net interest income as well as other sources of revenue, and was only partially offset by a small increase in compensation and other operating costs. The company’s trailing earnings multiple is 14, which puts it in value range in absolute terms but actually represents a more expensive valuation than what we see at many large banks. Perhaps oddly for a bank, M&T is actually close to being a defensive stock with a beta of 0.6 and a dividend yield of 2.7%. So perhaps we should think of it as being more insulated from the economy and performing well, and therefore being worth a premium to the megabanks.
We track 13F filings from hedge funds and other notable investors for a variety of purposes, including our work developing investment strategies based on the included information (for example, the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). We can also use these filings to identify large holdings of M&T Bank Corporation. It turns out Warren Buffett is a fan of the stock: his Berkshire Hathaway reported owning 5.4 million shares at the end of December (see Buffett’s stock picks). Billionaire Ken Griffin’s Citadel Investment Group increased its stake in M&T Bank to a total of 1.3 million shares (find Griffin’s favorite stocks).
M&T Bank’s peers include KeyCorp (NYSE:KEY), PNC Financial Services (NYSE:PNC), Signature Bank (NASDAQ:SBNY), and Fulton Financial Corp (NASDAQ:FULT). PNC and KeyCorp trade at a discount to M&T on a trailing basis, though the gap is narrow in both cases: their P/E multiples are at least 11 in each case. Betas are higher- above 1 for both banks. KeyCorp’s business was about flat in its most recent quarter compared to the same period in the previous year, but PNC recorded strong financial gains and may be worth looking into. Signature and Fulton, meanwhile, reported double-digit growth rates in their earnings last quarter compared to the fourth quarter of 2011. The two banks carry trailing earnings multiples of 20 and 15 respectively, however, and while analysts expect higher growth over the next couple years M&T is still a bit cheaper on a forward earnings basis. As a result we’d lean towards recommending it as a better value than these peers.
Oftentimes we don’t follow the reasons for an insider purchase, though M&T Bank turns out to have a case as a value stock. Its business is doing well- in absolute terms it would qualify for value status based on its earnings multiples and growth rates- and while it is not quite as cheap as larger banks it may be better positioned for a downturn. Investors may be interested in doing more research on the stock.
Disclosure: I own no shares of any stocks mentioned in this article.
