Financials
After earnings beats from JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, PNC as well as Citi why were all the other banks up significantly and Citi was down 5%? Charles Peabody discusses asset caps (Citi is already shrinking itself by shedding its global consumer bank, so an asset cap makes no sense whatsoever) and a probable delay in the Banamex IPO. He argues Citi is one of the best stories in large cap financials and is the only company able to repurchase large amounts of its common stock at a substantial discount to TBV. Expectations are low, the regulatory pressure is high and management is doing all the right things.
Edition: 197
- 18 October, 2024
Financials
While many are trumpeting the fact that GS is returning to its roots, investors should remember what those roots were and why investors and (GS itself) wanted to transform this organisation into something different. Charles Peabody loves a turnaround story and has been alongside Bank of America in the past, Wells Fargo, and more recently Citigroup, emphasising that it generally takes 5 years to transform a company. GS is no different. He would exit the shares and favours Citi as a turnaround, WFC as a work in progress about to exit a regulatory yoke, BAC as a play on rates, and JPMorgan as a defensive fortress.
Edition: 175
- 08 December, 2023
Financials
With rising NII and continued expense discipline, Howard Mason expects BAC to reach its target for a 60% efficiency ratio by the end of 2023 - this will support a return (on tangible common equity) of 16-17% consistent with a valuation multiple of 1.8x that, applied to Howard’s estimate for tangible book value of $23/share by end-2023, supports a TP of $42 (30% upside). In the meantime, even as BAC raises its dividend and looks to delever (increasing the CET1 ratio to 10.75%), there remains significant capacity for buybacks (expects $8bn over the next twelve months representing ~3% of current M/Cap).
Edition: 139
- 08 July, 2022
Individual commodity fundamentals could provide good opportunities
In the face of a higher USD, unclear Chinese lockdowns, stock market declines, commodity-specific issues and a rush to cut VaR during outrageous volatility, Kathleen Kelley discusses how commodities have clearly faced a powerful witches brew. Just a week after the Invesco Commodity ETF drew attention for its record holdings, Bank of America’s monthly fund manager survey reported that Long Oil/Commodities remain the most crowded trade for the 2nd consecutive month. Commodities could be entering a period where individual fundamentals matter, providing excellent relative value opportunities.
Edition: 138
- 24 June, 2022
Value stocks for 2022: Uber (UBER), Bank of America (BAC), Scotts Miracle-Gro (SMG)
Jonathan Boyar recently spoke to Barron’s about Boyar's Forgotten Forty portfolio which has produced an average annual gain of 11.5% over the last decade - all the companies highlighted are businesses which they believe are most likely to outperform the leading indices in the year ahead due to a catalyst on the horizon. Stocks discussed include:
UBER - Profitability in Mobility business is underestimated. It also holds valuable equity stakes in other ride-hailing businesses worth ~$10bn. TP $79 (100%+ upside).
BAC - The most interest rate sensitive of the major US banks; lots of room for NII to rise. TP $61 (30% upside).
SMG - Cannabis business (which has grown 100% in the last 2 years) is in the price for free. TP $242 (~75% upside).
Edition: 129
- 18 February, 2022