Sep

11

Three Banks To Own

September 11, 2007 |

I am a strong believer in Owning the Bank rather than depositing money in the bank (except for emergency money and special projects). Recently, banks have suffered, and for a reason: they got into risky loans that may cut into their earnings. There are, however, some banks which, although exposed, have a relatively high quality of loans in their portfolio, and excellent dividends, coupled with strong balance sheets. I am owning, and will continue to own three mayor bank stocks (same three bank stocks that Cramer picks, although I reached to the conclusion way before I started paying any attention to what he says):

Bank Symbol P/E Yield
Bank of America BAC 10.36 5.2%
Citibank C 10.5 4.7%
Wachovia Bank WB 10.2 5.3%

I am particularly happy that I stayed invested in Wachovia Bank (WB) from yesterday to today. Wachovia grew 3%, and I think it will grow (or rather recover) another 5 to 10% more from now until the end of the year.

The market will welcome even the quarter percentage point reduction on interest rates, and it will ease the liquidity pain a bit. The strong banks (including Wachovia) have already disclosed their exposure to the sub-prime and leveraged investments markets. And banks with strong portfolios (including Bank of America) have already stated started buy discounted debt obligations that truly reflect the level of risk on their price (or better).

Then again, I doubt too many investors will pass on yields like these ones, especially when they have grown because of increases in dividend payouts (not only due to the temporal decline in stock prices due to the sub-prime crisis).


Comments

1 Comment so far

  1. js on October 19, 2007 7:33 pm

    What about WM? The best dividend and pe play out there right now in my opinion.

Name (required)

Email (required)

Website

Speak your mind

 

Recomended Links:

* Your Link Here