Taking Profits in Umpqua Holdings (UMPQ)

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September 8, 2008 | SIN Picks | | Author Asif

Our regional banking pick Umpqua Holdings (UMPQ) held up really well last week while the Dow dropped 2.79% and the S&P 500 gave up 3.16%. The company got another 8% boost today after the government bailout of mortgage giants Fannie and Freddie and the release of the following statement from Umpqua,

“The financial services industry is struggling as a result of the housing market downturn and we’re now seeing the impact of that as companies eliminate their residential mortgage lending divisions. Umpqua Bank isn’t making any changes to this area and, continues to see significant activity in its mortgage division. Umpqua’s management team has carefully stayed within its traditional lending guidelines rather than moving to the industry’s less responsible requirements and, as a result, has been able to sustain its strong credentials throughout industry turmoil.”

In addition the company declared a regular dividend of 19 cents today payable October 15 to shareholders on record as of September 30.

The stock has appreciated more than 32% since we added it to our model portfolio on 6/30/2008 and while I believe in the long-term prospects of Umpqua and am highly conflicted about selling it now, I think it would be prudent to take profits at this point. We may be entering the last act of the downturn in financial stocks but I feel that we have not hit the bottom yet. Hence I am going to sell Umpqua both from the SINLetter model portfolio and my personal portfolio and am going to move the company back to our watchlist in case we get a better point of reentry in the future. The closing price of the day will be used as the selling price in the model portfolio.

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