Shares of New Jersey based Commerce Bancorp (CBH) have been strong lately, along with other bank stocks, as investors hope the Fed will stop hiking interest rates when the Fed Funds rate hits 4.5% early next year. However, after a run from $27-$28 to $33-$34, shares of CBH could see weakness in the short term.
Although the company’s long term growth prospects remain among the brightest in the industry, the flatness of the yield curve will make it difficult for CBH to beat, or even meet, Wall Street’s profit expectations in both the fourth quarter and early 2006.
Any guidance reduction in Commerce’s soon-to-be-released mi- quarter update will likely cause a 5 to 10 percent sell-off in the stock. At that point, long term investors can be more aggressive with their positions.