Time to Buy Big Banks? (BAC/C/WFC/JPM)

Time to Buy Big Banks? (BAC/C/WFC/JPM)

Bank-bashing has become a national pastime in the last few years (1, 2, 3, 4). From unfair subsidies as too big to fail to unwieldy conglomerations that no one knows how to value, run or even understand, there is no shortage of criticisms for TBTF banks.

Does this create an opportunity?

Early contrarian investors in 08 such as Bill Miller were trampled by the herd and in retrospect buying way too high. Paulson/BAC and Ackman/C have been similarly hurt trying to time to bottom and inevitably sells at the bottom:

Paulson in BAC 2011

Ackman with Citi in 2012:

So, what is different now that could make banks a buy? I actually won't go into the fundamental reasons because they are common place. At a high level, bac/c are trading at slightly less than 1x tangible book and all are trading ~10x or less "normalized" earnings.

I don't believe fundamentals can be an effective timing tool alone here, so let's look at market psychology. Are flows finally moving into financials?

As such, is now a good time to buy and hold for the next 3-5 yrs (until normalization?)

Disclosure: no position, but may change at any time

 

I would be interesting to hear more perspectives. I don't have enough background or knowledge to make an informed decision.

The error of confirmation: we confirm our knowledge and scorn our ignorance.
 

I'm actually too heavy in cash right now (bad time, I know). I actually meant to spend some time looking at the big banks today, but got too busy.

The main problem for me is that even though I understand the businesses from a high-level, I never feel comfortable bc I feel like their earnings are so succeptable to accounting shenanigans that I don't follow/understand closely enough.

Overall, I feel like with the run up we've seen it's hard to justify buying equities now, but I'm sure I'll just miss out on more $ if I don't.

twitter: @CorpFin_Guy
 
Best Response

JPM & WFC are definite buys.

Other than that, no big banks are worth buying right now. They are overheated.

Mid-sized banks to buy:

Bank of New York Mellon BB&T Corp PNC Financial State Street

Overall, the following stocks are my most bullish bets for the year:

Talisman Energy BP PLC Valero Seagate Morgan Stanley Daimler Nucor Corp BNY Mellon Arcelor Mittal Conoco Phillips Fifth Third Bancopr and Metlife Inc.

"Come at me, bro"- José de Palafox y Melci
 
lasampdoria:

Seagate

Really?

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 

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