Buy: Synovus Financial (SNV)
This Georgia bank conglomerate borrowed nearly $1 billion in Troubled Asset Relief Program money and says it doesn't know when it will pay it back. Synovus has diluted its shares to raise capital, and its stock is down 90 percent since 2007. It's easy to see why some investors would want to stay away from Synovus, but Anton Schutz, manager of the $62 million Burnham Financial Industries fund, says the stock is too cheap to pass up. Analysts often value a bank stock in relation to the firm's tangible book value (what the firm would be worth if liquidated). Synovus trades at 0.9 times its tangible book value, below the average of 1.7 times for U.S. regional banks. A favorable tax situation sweetens the deal. "They're through the really, really rough part," Schutz says.
Sell: KeyCorp (KEY)
By many financial measures, KeyCorp -- which has paid off all its TARP obligations and has posted profits since 2010 -- is in pretty good shape. KeyCorp has also been highlighting the recent growth of its loan portfolio. But KBW bank analyst David Konrad worries that the Cleveland-based bank, while having a strong brand in Ohio and New York, has struggled to gain traction in farther-flung markets. A KeyCorp spokesperson says the bank sees opportunities to grow in the western U.S. and will continue to spend money there. KeyCorp's shares, which have risen 33 percent since last fall, are now valued about 11 percent higher than those of other regional banks, Konrad estimates.
Hold: General Motors (GM)
General Motors' new shares are down nearly 45 percent since they debuted in late 2010 and are valued at about five times this year's estimated profits. The firm's European arm is losing money, and its pension liabilities are underfunded by $12.9 billion. Still, David Segal, comanager of the $14.1 billion Mutual Shares fund, says investors should look beneath the surface. GM doesn't face mandatory pension contributions until 2017, and if interest rates rise, the shortfall could shrink dramatically. The company has plowed more cash into its car development, which bodes well for future sales, Segal says. He hopes the firm will issue a dividend next year (a GM spokesperson says the balance sheet and product line are the highest priorities).