I added more to my position in Community Bancorp (CMTV) on 3/27/2020 at $11.99. Community Bancorp is now my 3rd largest holding.
Why Community Bancorp?
The stock has fluctuated a lot most likely due to overall market pressures from the COVID-19 market pullback, market conditions for housing/small business, and most likely overall banking concerns over the lower interest rates. However, the company is very stable, has a good history of growth and is located in a market that has good loan growth potential.
Community Bancorp operates Community National Bank, which is a smaller local bank that doesn’t engage in risky financial business. Since Community Bancorp is local and it’s market is more local/small business, it should be less impacted by national issues. Also since the area in Vermont in general doesn’t have the large growth that other states have, it has less to fall from and therefore is less impacted by major economic collapses and recessions.
Also, the recent $2 trillion stimulus package should be funneling a decent amount of money to small businesses through banks link Community National Bank. This should drive more business and help build more bonds between the bank, local businesses and the community in general and will help the bank strengthen it’s business for the long term.
I also see the company being an acquisition target much like the Merchant’s Bank which I was invested for quite sometime. There are many similarities between Merchants and Community Bancorp. In fact, I would not be surprised if the same bank that bought Merchants (Community Bank System) decided to buy Community Bancorp too to expand more into their market area and also to end the confusion between the two brands here in Vermont.
Update on Valuation
Community Bancorp currently trades at a:
- PE of 7.14
- Price/Book of 0.99
- Dividend yield is 6.34%
One of the better dividend yields for the low risk nature of this business. It’s got a low book value (which I usually try to target less than 1.5 for bank companies) but with a less risk in my opinion and the dividend is a big good selling point.
I may add more if the stock price stays this low or goes back even lower as it has been lower than this recently but I missed getting it at the lower price.