“Too big to fail.”
Do you remember that?
After the crash of 2008 – that was a mantra that was heard all over Wall Street and D.C. – as the banks that are the pillars that support our nation’s economy had to be bailed out by the US federal government in order to ensure that America survived the worst recession since The Great Depression.
However…
With experts predicting that the longest bull run in American history is on its last legs – there are people eyeing those same banks that needed help of taxpayers in order to exist.
Is it time to start getting back into bank stocks?
Maybe…
But you better read this before you do.
Now, the Gorilla understands the trepidation of buying bank stocks… even though Warren Buffett has been snatching up shares like there’s a fire sale…
But after the banking regulations that were put in place after the crash – banks are more attractive than they’ve ever been.
Banks stocks offer a lot of value for both short-term and long-term investors – even after the terrible performance these stocks have had in 2020.
While the short-term moves may not be as evident as the long-term prospects – moving now may be one of the better moves you make going into 2021 – regardless of which candidate wins the election.
The fact that a lot of stocks are trending down – is exactly what makes getting back into the banking sector make the most sense…
They’re cheap!
Which is exactly what many investors look for in a stock.
Well… cheap may be the wrong word. Undervalued may be better – as if things start heading down the slope like a few analysts say – you could be setting yourself up for a windfall…
Making now one of the best times to pull the proverbial trigger.
One of the key factors in making a move toward these kinds of stocks has to do with the fact that they may be experiencing an “income statement recession”…
They are far from going through a “balance sheet recession.”
What does that mean? Well, it means that banks can fund elevated loan-loss provisions from earnings and not impair their capital – meaning they’ve got enough cash coming in that they won’t be over extended if people stop paying their loans.
An analyst for Wells Fargo (WFC), Mike Mayo says, “Book value is solid, and we think the third-quarter earnings reports will show book-value growth.”
So, at the very least we know that the stock most likely won’t take a nose dive due not having enough cash…
Which is a good thing – as if this was 13 years ago – it definitely would be.
Being a banking analyst – Mayo does have some favorites – with companies like JPMorgan Chase (JPM), Bank of America (BAC), PNC Financial Services Group (PNC), and U.S. Bancorp (USB) at the top of his list.
It’s interesting to note that his own company, Wells Fargo, isn’t on that list…
That may be why Buffett recently cut his own ties with the long-time banking staple – they must know something that we don’t.
However, of the banks on the list – we’ve got some high quality runners on this – as most the banks that are on the list are down just around 35% – making them a steal when we factor in their book value…
Not to mention – all four of them have pretty hefty dividends: JPMorgan yields 3.8%; Bank of America, 3%; PNC, 4.4%, and U.S. Bancorp, 4.7%.
However, the REAL anchor is the book value…
If you want to know about valuations when it comes to the banking sector – start with the book value and work your way out.
For example, JPMorgan and U.S. Bancorp both trade for 1.2 times their book value – while BoA is around 80% of book and PNC at 90% of its book.
It’s something to look at while we wait to find out who will become the next president…
If banking stocks sound like they’re up your alley – you may want to take a look at some of the ones I mentioned – it could ensure some nice profit in your future.
As far as GorillaTrades, we’re really not going to worry about any of these companies until they pop up on our trading matrix.
For those that don’t know – GT doesn’t work on rumors or emotion – our recommendations come STRICTLY with verifiable data…
We don’t take chances here – we simply look for potential using the numbers available.
If you’d like to see how it works, I’m inviting you to consider becoming a subscriber to GorillaTrades today.
If not – we understand…
But do yourself a favor and take a look at banking stocks – it may be something that pays off for your financial future.
““Drive-in banks were established so most of the cars today could see their real owners.” ― E. Joseph Cossman