Resiliency in the Face of a Hurricane: DRL

Doral Financial Corporation (NYSE: DRL) has been thrust by a ‘Force Majeure’ into a unique position of servicing its customers and their communities in the face of Hurricane Irene and providing them with cash and loan relief. The stock has held its ground in the face of a natural disaster and I believe that speaks volumes to its strength of support by shareholders…

The banking concern, through its 35 branches spread throughout Puerto Rico, is a full service bank and will be called on for capital outlays and loan extensions as the island nation recuperates from flooding, wind damage, and power outages. But Doral Financial Corporation (NYSE: DRL) won’t be alone and without allies; namely the U.S. Government.

Puerto Rico is a U.S. Territory, and in my opinion is headed for Statehood at some point in the next couple of decades, and Washington D.C. will mange through disaster relief resources to funnel capital and loan protections through Doral Financial Corporation (NYSE: DRL).

As I mentioned, the stock hasn’t taken a hit; this isn’t its first time in dealing with a hurricane and Puerto Rico, strategically situated to get the initial force of Atlantic hurricanes as they develop off of West Africa and move toward the Caribbean. The massive storms are generally in early develop, a one ranking in strength, before they hit the island and began gaining power and turning into a type two, three, or four storms.  

As for the stock of Doral Financial Corporation (NYSE: DRL) it’s holding its own. The shares were trading as high as $2.60 in early July and in a six week, textbook drop, fell to just above $1.25 during the broader markets sell off. The stock found a great deal of resistance for most of the sell-off month in the $1.40 range before being pushed to the buck and a quarter level. It has since bounced back from the $1.25 low and is currently trading in the $1.48 range.

With very few short sellers to hold it down, I think the stock can retake $1.60 easily in the immediate term (6 weeks). There has been some talk about bank consolidation in Puerto Rico with other banking concerns, but absent of a ‘surprise announcement’ that’s just speculation at this point in time. 

I haven’t, don’t, and do not intend on holding any of the companies mentioned in this article.