Insider Jeff Fleming

Stocks: Should I Stay or Should I Go?

One of the toughest issues an investor must face is deciding when to hold onto a stock or when to sell. Jeff helps one reader take a step back and revisit the factors that made a stock an attractive buy in the first place.

Dear Jeff:
I was wondering if you could give me your best advice on a bank stock called Harbor Federal Bancshares, ticker symbol, HARB. I have owned this stock for one year, and I am getting a little nervous about it because I am wondering how long the interest rates will continue to stay down. As you know, rising interest rates are like an earthquake to the banking industry. How do you feel about this, and what do you recommend; should I hold, or sell? I would appreciate any info you can provide on this subject.

Thank you, Joe

Jeff Says:
As far as your stock, Harbor Florida Bancshares (HARB), is concerned, I will share with you some information that I obtained from public sources. However, you should NOT rely solely on this information when making your decision whether to hold or to sell this stock. I strongly encourage you to do some research on your own and to talk with a stock analyst. You might even be able to find a stock analyst who specializes in the banking industry.

The information I found states that Harbor Florida Bancshares is a bank holding company for Harbor Federal Savings Bank and has 25 full-service banking offices in Florida. During the last quarter of 1998, its total interest income increased 11 percent to $25.6 million and its overall net income increased 21 percent to $5 million. Apparently, these results were positively boosted by, among other things, gains the company experienced from the sales of certain businesses.

One statistic that I always study before buying the few individual stocks that I own is the current price compared to the 52-week low and high. HARB is currently trading at a little over $11 per share, which falls nearly in the middle of its high and low during the last one-year period. The spread between the two figures is relatively small, which indicates to me that there is not much volatility with this stock. Its beta of a mere .53 supports my supposition.

When I buy a stock, I do so because I believe that company will be profitable over the long term. If interest rates rise as you point out, and they will ultimately, lending will decline and so may the profitability of financial institutions. But, if this occurs, it should only be for a relatively short period of time. Therefore, if you believe this bank is fundamentally strong and has long-term potential, then you should hold the stock unless you will lose sleep at night during periods of decline. Out of five brokerage houses reporting on this stock, three recommend holding it and two rank it as a moderate buy. I do not think major brokerage houses are too concerned about the effects of rising interest rates on this stock either.

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