XLF, Banking and Financial Sector Stocks
- JenL_2
- DennisL
- DennisL
- JenL_2
- SteveT
- MichaelC_AU
- DennisL
- MichaelC_AU
- JenL_2
- Kirk
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» JenL_2 - The Case for Banks
This article from 11/1 Money.com mirrors what we've been discussing on this thread:some excerpts:
Why bank stocks with their low P/Es look mighty good compared to the pricey competition.
By Michael Sivy
The Nasdaq composite hit an all-time high last week and plenty of blue chips are still trading at P/Es above 30. But those high-fliers mask the fact that lots of stocks have been pummeled in the past few weeks as third-quarter earnings reports have been announced. No matter how well the major indexes are performing, we're in a market with a distinctly bearish edge to it.
That doesn't mean that a broad market decline is imminent. But you should recognize that any negative news about a stock could well trigger a disproportionately sharp price drop. I don't believe in market timing, so I wouldn't start bailing out of stocks. But I have been selling a few things over the past couple of months to lower my risk exposure.....
....The major sector that currently seems to offer the best growth potential at the cheapest price is banking. The banks have been underperforming the S&P 500 for nearly a year now, in large part because of investors' fears that interest rates are headed higher. That's still possible and there are some other risks as well, but for long-term investors, the underlying case for the big banks is hard to quarrel with....
.....For the group as a whole, there are two key issues--interest rates and banking reform. Rates are in an uptrend, but it looks as though the worst is past. Long- term bond yields have risen more than a percentage point over the past 12 months and it certainly seems unlikely that they could gain that much again from current levels. Moreover, any rise in rates on that scale would do far more damage to growth stocks than to shares with P/Es that are already relatively low.
The more interesting issue is banking reform. Legislation is under way that would remove--or at least greatly erode--the barriers between banks, brokers and insurers. The most likely result would be a more profitable industry, widespread mergers and a much stronger global position for U.S. financial services giants. That won't be a slam-dunk, of course. Institutions can still make foolish acquisitions or become bogged down even with mergers that do make sense. But industry consolidation does generally boost the prices of stocks in a sector over five years, say. And to paraphrase Damon Runyon, although the battle isn't always to the strong, that's the way to bet.
......Jen
-- posted by JenL_2
» JenL_2 - Bank Stocks
TipWorld's Stock Tip of the Day for Nov. 8-9:BANK STOCKS: READING THE REBOUND
If you bought into the beaten-down banking industry in early October, you were probably patting yourself on the back by the end of that month: An across-the-board wave of renewed sector confidence lifted the S&P Banks Composite Index more than 20 percent in two weeks. What happened? Investors felt confident about controlled inflation as well as Y2K preparedness in the financial district. Of course, defaulting loans, especially from other countries whose Y2K readiness is insufficient, is still a viable threat. At least one prominent sector analyst, Michael L. Mayo, has made bearish recommendations to sell aggressively into the rising strength. The majority opinion, though, is that large upside potential is ready and waiting. Here are a few candidates for perusal:
Citigroup (C)
Chase Manhattan (CMB)
J. P. Morgan (JPM)
Bank One (ONE)
Bank One is the most brutally beaten-down of the above stocks. To see a comparative chart of all four, go to
http://bradhill.com/tips/stock/banks.htm
BANK STOCKS: PLAYING FOR MERGERS
At one time, about 14,000 banks existed in the United States. There are now about 8,600. That stark reduction is a testament to the consolidation trend of the financial sector. Investors barely blink at headline mergers, and most analysts believe that hundreds or even thousands of smaller mergers still lie ahead. It almost has become a Wall Street sport to pick healthy, lower-tier banks and wait for them to be acquired. Generally speaking, smaller banks have been traumatized by the 1999 sector slump to a greater degree than their big-city cousins. These depressed valuations may make them attractive for their own sake, regardless of merger prospects. Here are a few possibilities:
Washington Mutual (WM)
U. S. Bancorp (USB)
First Tennessee National (FTN)
Cullen/Frost Bankers (CFR)
For a comparative chart of the above four stocks, go to
http://bradhill.com/tips/stock/banks2.htm
Brad Hill http://www.bradhill.com is the author of 10 books about the Internet and personal technology. He currently teaches Investing on the Web, an online course for ZDU; writes the Investor 2000 column for Raging Bull; and is the producer of Closing Bell, a daily market report. The information contained in this tip is based on rules and regulations existing at the time of initial publication. These rules and regulations are subject to change. Neither TipWorld nor the author of this tip is engaged in rendering legal, accounting, or other professional services. The reader should always consult with a professional adviser to ascertain current rules and regulations and the application of this tip to personal circumstances.
.......Jen
-- posted by JenL_2
» SteveT - Citigroup
At least one opinion thinks it could be $60's or maybe $80 in the next year.full story
-- posted by SteveT
» MichaelC_AU - Glass Stegall Repeal
Here is an interesting article on the industry changes just passed:-- posted by MichaelC_AU
» DennisL - Glass-Steagall Repeal
Michael,Thanks for posting the link to the interview with Richard Bove. I found it to be very interesting. This guy Bove sounds like he knows his banking and finance history. One can only hope that he is wrong this time.
As BB likes to say, we will know in the fullness of time.
-- posted by DennisL
» MichaelC_AU - Article outlook
Yea the long term implications were not good. But at least this might help bank prices when other industries purchase them.It even mentioned the bank I own CNB. We had an big write-off 3rd quarter of 98. It made our earnings $.56 for that year. This year the earnings are predicted around $1.06. The stock is now $12 5/8. Other than the writeoff earnings have show consistant growth. A PE of 12 is pretty good for a bank, right now. I bought at $6.50(split adjusted) and need an exit for my IRA portion which I want to move to VTSMX.
-- posted by MichaelC_AU
» JenL_2 - Financial Sector
These posts copied from the "Ask Rande" thread:Author: dewam
Date: December 12, 1999 10:33 AM
Subject: Banking
Rande, what is your read on the financials? I know they seem to be linked to the interest rate, or fear of. My Mothers portfolio has zero exposure to them, so I started watching both Citigroup C,XLF, and Bank of America BAC in june. I thought the recent Glass-Steagall legislation would have more impact on the whole sector. BAC is located in your neighborhood, what is the talk on the streets? Is this last merger slowing things down? Where do you see the financial stocks going in the next 10 years. Den
I thought of putting this on the Banking & Finance page, but what I really want is your personal opinion.
Author: Rande (Rande Spiegelman)
Date: December 12, 1999 10:46 AM
Subject: dewam,
dewam,
I like the financials. The three "big" sectors of the 90s have been tech, healthcare, and the financials. The financial and healthcare sectors have taken a backseat to the techs this year for a number of reasons (higher rates, political issues surrounding the pharmaceuticals and HMOs, insatiable appetite for anything tech, etc.). My expectation is that with a stable-to-lower interest rate environment and the invevitable consolidation to come with reduced regulatory barriers, the financials will be a great place to be in the months/years ahead. Likewise with healthcare, given the breakthroughs in the biotechs, new and better drugs, and favorable demographic trends. Perhaps most important is the need for appropriate diversification among these sectors. My recommendation, of course, is to take a market weighting vis a vis the W5000/Total Market. Having said that, if one were to slightly overweight any individual sectors in an attempt to add value, tech (duh), financials, and healthcare seem logical.
Bottom Line -- I'm bullish on financial assets in general and believe an inclusion of a market weighting to the financial stocks, AT LEAST, is smart.
Rande Spiegelman
Author: Kirk (Kirk Lindstrom)
Date: December 12, 1999 12:01 PM
Subject: Agree Rande
I have been underweighted in my personal portfolio in both health care and Financials.
I think tax loss selling and no need to window dress these two sectors this year might be giving us an opportunity that I am thinking of exploiting before the yr ends with some of my IRA monies. I think all the "dumb money" is now chasing internets and some Tech's (just listen to some talk radio shows and what the clueless are saying and buying for an idea) and the smart money will adjust accordingly. I am not saying get out of technology, just a reallocation from way overweighted to slightly overweighted could be a wise move before Y2K.... Of course I like C and have had it in my Savvy portfolio forever, but I think I will use sector funds for personal money now as I am no real expert in financials or health care compared to what I know about technology.
Kirk Lindstrom - Editor: Investing and Personal Finance
Author: Rande (Rande Spiegelman)
Date: December 12, 1999 12:06 PM
Subject: Kirk,
Kirk,
Sector Spiders (including the new Barclays varieties coming out), may be a cost and tax-efficient way to play the sector game. So many actively-managed sector mutual funds have high expenses and killer distributions from a tax perspective.
Rande Spiegelman
-- posted by JenL_2
» Kirk - Leaders or Value?
This has been the decade to either lead of get out of the way.http://finance.yahoo.com/q?s=xlf+bac+c+w...
XLF and BAC have not done as well while C and WFC have.
IF a stock leads, it has often carried a portfolio to market beating returns. Have the wrong stocks, and you get portfolio underperformance.
Can this be the turning point for XLF, BAC and other bank stocks that are good "Values"?
I'd like to discuss these stocks here as well as Banking sector mutual funds. Some financial funds have done well with heavy weighting in the likes of Sch and Amtd http://quote.yahoo.com/q?s=sch+amtd&d=1y
These are well off highs but up well overall.
Lastly, what about Rubin at Citigroup? Does this signal that C is ready to lead the Financial World into the 21st Century? Can't think of a better spokesman to approach foreign officials about banking reform in countries you wish to expand into.
-- posted by Kirk
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