"Fast Money" guest Gary Kaminsky, the former managing director at Neuberger Berman, offered a few pointers on how to pick good investment opportunities out of the junk of a list of the worst-performing stocks in the S&P 500. Two of his favorites? Vulcan Materials (VMC) and SunTrust (STI), two housing-market-related companies with big exposure to downtrodden Florida.
Despite that seemingly frightening fact, Kaminsky said that tax-loss selling by mutual funds have pushed these two stocks lower than their relatively strong fundamentals should have allowed. He expects Vulcan and SunTrust to be outperformers from October through the end of the year.

Pete Najarian says keep an eye on Smith International (STI) due to unusual options action. "That one looks awfully interesting!"

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Outperform - Price 21.98 on Aug. 26
by Fox-Pitt Kelton Cochran Caronia Weller

We reviewed two SunTrust securitizations to look for trends in prime residential mortgages ('07 vintage) and Alt-A portfolios ('06). [The term Alt-A usually refers to a set of loans with a risk profile that's a notch above subprime]. The adjustable-rate prime mortgage portfolio at the company was $24.6 billion (20% of loans), evenly split between [adjustable-rate mortgages] and jumbo mortgages [those above about $700,000]. The remaining first-mortgage Alt-A portfolio is about $694 million (less than 1%). We view the securitization data as a proxy for trends in the residential mortgage portfolio. We continue to view SunTrust as being well-positioned to deal with its credit issues. While prime mortgages will likely remain stressed over the next few quarters... we believe SunTrust has enough capital to deal [with] potential loss content...We remain less concerned about the [small] Alt-A portfolio...We're raising our target to 22 (1 times projected 2009 TBV) from 20. Market cap: $11 billion.

The banks? Crumbling? However, most of the crumbling stocks don't even trade. The ones that do are acquirers and they are going higher, not lower. Capital One (COF) says things are better; SunTrust (STI) says things are worse.

banks feel good

That could mean that Zions (ZION), Regions Financial (RF) or even Suntrust (STI) could be in the crosshairs of commercial real estate. That's why you stick with the small regionals that have paid back TARP or had no need for it. That way you can sleep at night.

"But we must collapse Fifth Third (FITB), KeyCorp (KEY), SunTrust (STI) and Regions Financial (RF) into other banks if we are going to move through this period. We aren't there yet." "FDIC and Treasury at Loggerheads," 6-10-09

Good solid performer, much room to grow

Also trimming its payout is an institution that didn't fare as well in the stress test: SunTrust Banks (STI). It said Friday that it will sell up to $1.25 billion of common stock and cut its quarterly dividend to a penny a share from 10 cents, to help boost its common equity by $2.2 billion. SunTrust also might sell other assets and exchange preferred shares for common stock, to raise more capital.

florida foreclosures

Sun Trust has a long way to go down still. Highly exposed to Florida markets

Headed for book value of $51.45