Forget Earnings — Look at This Indicator Instead (NYCB in Focus.)

Hello, everyone, and welcome to February’s issue.

It’s such an exciting time. There’s so much going on. And here’s another example of price leading developments:

New York Community Bancorp plunges a record 45% after dividend cut

…thundered Bloomberg, reporting on news of the bank’s difficulties, particularly regarding commercial real estate.

As usual, dramatic news like this is thought to have come out of the blue. But it doesn’t. Our thesis is that relative strength of the share price is a good way of determining what the market thinks of a company’s prospects.

This chart shows that NYCB’s relative strength versus the iShares U.S. Regional Bank’s ETF peaked in August last year. From then, and particularly from October, NYCB shares were significantly underperforming their peers.

This was a clue that something was perhaps not quite right. Then, issues came into the open.

This episode is further evidence that the stock market does its job by looking forward and anticipating news before it comes to light.

Enjoy the issue, and remember: if your bank’s share price is underperforming its peers, pay extra attention.

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