This post was just published on ZYX Buy Change Alert.
SAN is falling along with the Spanish market.
The Plan
SAN is a very long-term position and the plan is to accumulate on bad news. Currently 25% of the full core position size is being held, so there is plenty of room to add to the position.
However, there is more room for the stock to fall. We would want to add on two potential negative events as they will provide us with great prices. First, if the prime minister Mariano Rajoy is ousted, and the second if no party gains majority in a new election.
What To Do Now?
Those holding 25% of the full core position may continue to hod and not add at this time and look forward to adding at lower prices if they occur.
Those not in the position and are aggressive, may consider building up to 25% of the full core position in the zone of $6.26 to $7.70.
Those not in the position and are conservative, may consider accumulating no more than 25% of the full core position only on a break below $7.25 at the risk of not participating in the opportunity.
Background
For background a prior post on SAN is being reproduced below. Please note that the symbol for SAN used to be STD.
STD is one of the largest Spanish banks. Spain is clearly in trouble.
What is often missed about STD is that it has significant operations outside of Spain. The company is among the top 15 financial institutions in the world.
Take a look at the chart that shows lending by country.
Here is a breakdown of over 100 million commercial customers by country.
The map shows breakdown by region of the bank’s profits.
Any time a majority of investors miss the big picture, it represents an opportunity for those willing to step up.
There is an old saying, “Buy when there is blood in the streets.” In the modern context, as far as STD is concerned, there is blood in the street.
This is a high risk high reward situation. If the situation in Spain gets really bad, there may be a run on this bank. In such an event the stock can go to zero.
On the other hand, if Spanish and European situation is slowly resolved, over the next year, our target is $16 to $18. Afterwards, if there are no major problems with Europe, and the Latin American economy starts rapid growth, STD has the potential to be a $50 stock in five years.
We have been writing about critical bond auction in Spain tomorrow. If the auction goes well, this stock has the potential to spike up. However there is no way to tell how the auction will go. In the event of a poor auction, the stock will dip.
