Motley Fool: M&T Bank difficulties could make it attractive to investors

M&T Bank (NYSE: MTB) posted disappointing second quarter results in July. Its struggles have recently depressed the stock, which means it could be a good time for investors interested in buying.

Consumer loans are currently enjoying more momentum than commercial loans, and M&T is primarily a commercial lender. Its credit quality has also deteriorated in recent times – its unrecorded loans, those that went 90 days without payment, increased 15% year-on-year in the second quarter.

But M&T Bank is developing non-interest-bearing deposits well, so it pays no interest on about 43% of total deposits. M&T’s upcoming acquisition of Connecticut-based People’s United bank is also promising.

Its addition will significantly increase M&T and its tangible book value, by TBV. Banks trade on the basis of the TBV, so an increasing TBV usually helps the stock. The deal is also expected to increase M & T’s earnings per share from 10% to 12% in 2023.

It should also open up new income opportunities; People’s United has many small business clients to which M&T can cross-sell products and services. Meanwhile, People’s United brings in a strong equipment finance business that it can expand to M&T customers.

While M&T Bank may face challenges in the near term, this is an opportunity to buy long-standing, high-performing bank stock at a historically low tangible price-to-book ratio – with a dividend paying off recently. about 3.2%.

Ask the foolQuestion: What does it mean if a company goes public via direct listing? – BN, Madison, Indiana

A: Think of a traditional IPO – the initial public offering whereby most companies “go public,” issuing new shares to trade on the public market for the first time.

The process typically involves companies hiring investment banks as underwriters to manage the process, including determining an appropriate valuation for the company and the share price. For this, underwriters often received up to 7% of the gross proceeds of the IPO.

With a direct listing, companies bypass underwriting middlemen and sell existing stocks (such as those owned by employees) to the public, saving money.

Question: What’s so bad about buying a stock at, say, $ 30 instead of $ 20, if you’re sure it will hit $ 60 in 10 years? – CD, Walnut Creek, California

A: It’s all in the math. Imagine Holy Karaoke Inc. (ticker: HYMNS) is trading at $ 30, and you expect it to hit $ 60 in a decade. This would be a gain of 100% in 10 years, or an average annual gain of about 7.2%.

But if you bought it at $ 20 and it hit $ 60 in 10 years, that would be a tripling – a gain of 200% (about 11.6% per year, annualized).

Considering that the overall stock market has gained around 10% per year over long periods of time, you can see that a 7% annual gain is less attractive than an 11% gain.

Still, there’s a case to be made that getting into a formidable stock at $ 30 instead of $ 20 is okay, especially if you hope to hold it for many years to come. In general, however, the price you pay for a stock matters.

My dumbest investmentMy dumbest investment was selling my Microsoft stock for around $ 40 a piece in 2014. (I bought them in 2008 for around $ 30 each.)

I’ve learned that it’s best to hang on to a big business, unless the underlying fundamentals of the business have changed. – BD, online

The madman replies: It’s an extremely common mistake to prematurely sell shares of a great company – and many people do it after making a reasonable gain, like you did.

Your $ 30 to $ 40 trip with the stock gave you a 33% gain, but as you know, if you had held on you would have done a lot better.

After you sold your stock at around $ 40, the stock’s value continued to rise, but not in a linear fashion.

The shares were recently trading at around $ 300 apiece. So if you had held on you would have a 900% win on your hands. In the 13 years since you bought them, they would have increased at an average annual rate of around 19%.

The story is the same for many great long-term artists: many people have sold after a gain of 20% or 50% or even 100% or 300%, only to miss out on gains of 100% or 10,000% – or even more !

The more you learn about your holdings, the stronger your beliefs about them will be, which can help you hold on as long as their future looks bright.