If you're looking for an easy double, Dick Bove thinks there's no better place to find it than the very bank you're working for. In the following video he explains his thesis that bank stocks are set to double based on healthier balance sheets and better business practices. I personally haven't given the sector a hard look since 2009 (when it was all FAZ all day every day), so I'll admit that I'm intrigued. Still, while BAC at $3 was kind of a no-brainer, is the same true at $17? Are we really going to see GS back above $300? Interested to hear what you guys think.
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Read an interview with Tom Michaud in which he calls 2014 the year of the bank IPO expecting 15-20 $20bn+ banks in the short term. Writing from my phone but ill try to pull it back up for some details.
My portfolio definitely is leaning financial sector heavy right now and it does include BAC. Doubling seems maybe a bit too optimistic though.
I have no idea but my tiny stake in my bank's stock is up double digits in three months so maybe Bove is on to something.
Out if curiosity, do any bankers here own bank stocks in their portfolios? I like bank stocks at these levels but it seems like you're already very overweight the sector by virtue of working in the industry. Personally, I can't justify making a significant allocation to financials when I consider what could happen to my finances if there was a major downturn in the industry.
I think diversifying your portfolio away from your wages is a good idea. I don't follow my own advice, however, and have been riding the shit out of BAC since ~$6.
Maybe not doubling, but significant upside nonetheless, especially now that net interest margins can start to rise as yield curves steepen. Plus a lot of regulatory uncertainty is already priced in.
^ You should take my job
Careful....
Personally, I think there are better ways to go long the financials than buying the big banks. Slowdown in M&A and refinancing activity (the latter due to higher interest rates) have been a drag on their earnings for a couple quarters now. So basically you're betting, as was mentioned in the video, on the fact that profits are gonna come from the banks' lending units finally put their excess cash to work.
But this industry-wide backlog of cash means there's an oversupply of money waiting to hit the market. This puts the pricing power in the hands of the borrower; in this environment, a borrower with good credit is being courted like LeBron James circa 2010. That one guy in the video was absolutely right: you're gonna see margin contraction as this cash enters the market. And just imagine the chaos if the Fed stops paying interest on excess reserves (although this is not going to happen in 2014 so I guess I'm getting off topic).
I'm not saying bank stocks are a bad investment; they were hammered so hard in the crisis, buying now is like picking up a blue-chip tech stock after the bottom in '01. I just think there are better places to be if you want to bet on a steepening of the yield curve. I like the insurers, especially life, although some of them are admittedly a little crowded at the moment - I think AIG has been a top five hedge fund holding for almost a year now. I also like online brokerages, as they have avoided much of the regulator oversight that the big banks have been subject to and have actually been able to put their cash assets to work. I think both are a better play on rising interest rates, but then again what do I know.
Buying in '09/'10 was like picking up a blue-chip tech stock after the bottom in '01. Agree with everything else though :p
I do agree, what goes down and does not die usually comes back up. I've been heavy long on bank stocks for a while now and seeing some really good double returns so far. It would be nice to see a double, but I think it would be far fetched as lending won't likely increase much once the cheap money is gone.
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