Shares can be bought with different strategies. Maybe we believe in the product and know the company will do well. Or we look at the numbers and go with them. One such perfect opportunity may be when a company is selling below book value!

When a company is below book value, it means it is being sold at a price lower than its total assets as shown in the financial statements. If a company is being sold for less than its book value, it means that its current market value is less than the value shown on its books. This usually happens for several reasons:

• First, the book value of the asset is only reduced by depreciation over the years, not by actual losses in value. Thus, the market value may be less than what the firm records in its books for the asset.
• Second, the use of historical cost in accounting does not reflect today's fair value of a firm's assets. This may be lower if the firm is not going through a good period.

Thus, selling below book value may indicate that the firm is in trouble - it has lower profits than in the past, is losing money, or is simply losing value in the market. This causes investors to walk away from it in search of better opportunities and pushes down its price.

For a potential buyer, selling below book value is a good opportunity because it can acquire the company's assets at a discount. However, it depends on what exactly is the reason for the lower market value and whether it is a solvable problem. And today we look at two companies in the banking sector where hopefully it should be a solvable problem. I just want to point out that we all know that the banking sector is in trouble right now and we need to be extremely careful!

Penns Woods Bancorp$PWOD

Penns Woods Bancorp is a smaller regional bank with a market capitalization of $161 million. Headquartered in Williamsport, Pennsylvania, a very thinly traded stock on the NASDAQ that is now at 96% of its book value. Moreover, it offers an interesting dividend of around 5.6%.

The bank has seen growth in both deposits and loans. Even so, you have to keep asset quality indicators in mind. Provisions for loan losses increased slightly from the fourth quarter to 0.7 million. The percentage of non-performing loans to total assets also improved from 0.24% to 0.23%. Finally, the ratio of non-performing loans to total loans improved to 0.28% from 0.30%.

The bank is paying an excellent dividend while the valuation is relatively fair. The stock appears to be on track, thanks mainly to deposit and loan growth. The fact that they are trading below book value would be a nice bonus in that case. Also positive is that this is a bank that has not experienced a run on deposits

HSBC Holdings $HSBC

Headquartered in London, HSBC Holdings, which operates globally and has been in business since 1865, is now available to buy for 72% of its book value. Earnings are up 19% this year and 6.30% over the past 5 years.

HSBC is a global banking and financial institution headquartered in London. It was founded in 1865 in Hong Kong and is still a key bank in Asia today.

HSBC is one of the largest banking groups in the world with active clients in over 60 countries and territories across continents. It operates in markets from the UK to Latin America, from Canada to Europe, the Middle East and Africa and, of course, in key Asian countries.

HSBC's portfolio of banking and financial services is broad - from retail banking for individuals and small businesses to commercial banking, investment banking, asset management and insurance. Today, HSBC has approximately 220,000 employees and operates more than 4,000 branches worldwide, with more than half of its revenues coming from Asia and most of its profits also from Asia.

In recent years, big macro risks have emerged. HSBC exposed itself to risks in the Chinese property market by buying bonds of property developer China Evergrande Group. A liquidity crisis has been reported at this firm. HSBC then sold the Evergrande bonds in an attempt to reassure investors. Even so, the tilt towards China brings with it potential downsides, as the whole Evergrande fiasco shows.

https://www.youtube.com/watch?v=OABQT3gyYmA

In Europe, the fall of Credit Suisse $CS and the failure of Silicon Valley Bank in the US could hurt economic growth. Banks in Europe are scrambling to conserve cash in the wake of these crises. This is despite the fact that inflation has fallen sharply.

In recent reports, minority shareholders have called for higher dividend payouts and radical restructuring. But that doesn't seem justified, especially considering that the 2022 annual dividend was the biggest payout in four years. If HSBC can withstand the macro situation, selling below book value could also make it an interesting choice for investors.

Disclaimer: This is by no means an investment recommendation. It is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.