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Joseph Massey
Joseph Massey

Bank Stocks To Buy UPD

JPMorgan Chase is the largest bank in both the United States and in the world by market capitalization. Named after John Pierpoint Morgan, a famous 19th-century banker and financier, the New York City-based company has played a leading role in shaping the U.S. and global financial industry.

bank stocks to buy

Mastercard is a leading payment processing and credit card company, second only to Visa. It provides payment solutions to individuals, businesses and governments while also working with banks and other card issuers to set up new programs. In addition, it offers data analytics based on transaction records to furnish businesses with spending trends and insights.

Headquartered in Charlotte, N.C., Bank of America is the second largest bank in the U.S. Like JPM, it offers commercial banking services to individuals and small businesses as well as investment banking. During the financial crisis of 2008, Bank of America purchased the investment bank Merrill Lynch, which it now uses to run wealth management services.

From its headquarters in Beijing, ICBC provides banking services to both individuals and companies, with 680 million individual banking clients and 8.6 million corporate clients. It has won awards from publications like Forbes, Fortune and The Banker for being one of the best banks in the world.

Wells Fargo is the third largest bank in the U.S. by market cap. Established in 1852 during the California Gold Rush, Wells Fargo went on to open branches throughout the West (and the world), and the company still maintains its headquarters in San Francisco. WFC offers individual, small business and commercial banking through its thousands of bank branches.

Since its founding in 1935, Morgan Stanley has become one of the most iconic brands on Wall Street. It is the largest standalone investment bank in the world by market cap and offers services like sales and trading for investments, wealth management, market research and access to capital markets for corporations. MS doubled the size of its quarterly dividend in 2021, thanks to strong performances from its traditional services as well as from its recent acquisitions, like E-Trade.

Chance for government support in recessions. The health of the financial sector has a direct bearing on the health of the global economy. As a result, financial firms can count on special support during a recession or a financial crisis. When banks ran into financial trouble during the Great Recession, for instance, governments bailed many of them out.

Benefit from rising interest rates. Today, interest rates are near historic lows. When they go up, however, banks, credit card companies and other lenders could increase their earnings by charging higher rates. Insurance companies can also earn more from their fixed income investments as bond interest rates go up.

Innovation from fintech. Financial sector stocks have benefitted from innovations like blockchain, mobile payment apps and robo-advisors, laying the groundwork for more sector growth.

Cyclical performance during recessions. Financial stocks are cyclical and sensitive to economic downturns. When people and businesses are struggling, they take out fewer loans, invest less and spend less on their credit cards, reducing revenue for financial companies. Not to mention, they may stop making payments on their existing loans.

Disruption from technology. While the fintech innovations are exciting for new up and comers, they could disrupt established banks and other financial companies, adding an extra risk for their long-term prospects.

Experts recommend that non-professional investors take a diversified approach to investing. Rather than buying individual stocks, check out exchange-traded funds (ETFs) and index funds. Diversified funds let you benefit from industry gains while avoiding the pitfalls of single stocks. You can find the right fund using screeners available on your brokerage platform.

The SPDR S&P Regional Banking ETF dropped by more than 12% on Monday after regulators shuttered Silicon Valley Bank and Signature Bank. They're the second- and third-largest bank failures, respectively, in U.S. history.

Marinac also named Truist as a top sector pick, saying the company has a competitive advantage among regional banks after selling a portion of its insurance unit. Truist stock has dropped 30% over the past five sessions.

Analysts believe Popular (BPOP (opens in new tab), $53.05) is poised for steady-if-not-spectacular growth. The regional bank serving Puerto Rico, New York, New Jersey and Florida is expected to deliver average earnings growth of 5% a year for the next half-decade.

The regional bank is forecast to generate average annual earnings growth of 7.5% over the next five years, according to data from Refinitiv. Its quarterly results are expected to come after the April 22 closing bell.

With more than 1,100 branches across 15 states and about $130 billion in assets, Cleveland-based KeyCorp (KEY (opens in new tab), $16.39) is one of the largest regional banks in the nation. A hefty dividend yield north of 4% and solid growth prospects have analysts convinced that solid returns still lie ahead.

SVB, which stands for Silicon Valley Bank, is a go-to bank for tech-sector startups. In addition to commercial banking, the firm offers services ranging from venture capital and private equity to private banking and wealth management.

Outsize long-term earnings growth and a generous dividend yield have analysts plenty bullish on Citizens Financial Group (CFG (opens in new tab), $34.11), the 13th-largest bank in the U.S.

Wall Street's top four banks suffered a stunning $55 billion wipeout last week as SVB went under, and regional bank stocks including First Republic, PacWest, and Charles Schwab plummeted on Monday as shareholders braced themselves for another 1980s-style banking crisis.

But the steep sell-off is likely overdone, according to DataTrek cofounder Nicholas Colas, who pointed to the KBE bank stock exchange traded fund. It has sunk 17% over the past 50 days, which is 1-2 standard deviations below its long-run average 50-day return.

"Statistically speaking, therefore US regional banks (KRE) are much more oversold than US banks generally (KBE), but might they continue to be under pressure over the near term? Of course they could," he said.

That's because current losses still haven't reached the levels of past crises. When stocks plunged at the start of the pandemic, KRE's 50-day trailing returns ranged from -30% to -50%. During the Great Recession, returns were -25% to -41%.

"The 50-day return math says US regional banks are a 'Buy', but history (and the scars it leaves on investors' psyches) says 'wait,'" Colas warned, urging investors to look for at least another 20%-30% downside this week before jumping in. "Otherwise, waiting for the dust to settle seems like the more sensible strategy. As we sometimes mention during market dislocations, we've seen more Wall Street careers end by trying to pick bottoms than any other trading/investment mistake in the book."

Still, investors have already started buying up battered stocks. Regional banks posted a strong rebound in early Tuesday trading. First Republic jumped 58% after plunging 62% on Monday. Meanwhile, Western Alliance surged 39% after losing 47% on Monday.

Berkshire Hathaway (BRKB) is suffering a $12.6 billion loss on 15 of its worst-performing U.S.-listed stocks this year based on the dollar value of current holdings, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And the sector giving him trouble now? Financials like Bank of America (BAC), Ally Financial (ALLY), Bank of New York Mellon (BK) and U.S. Bancorp (USB).

Buffett's long-standing penchant for financials is costing him now. Six of his 15 worst performers this year, on a dollar amount, are in the financial sector. The market value of banks about the world has plunged more than $500 billion in the past week and a half, says Bespoke Investment Group. And Berkshire Hathaway is a large owner of some of them.

"From March 6th to March 15th, total market cap (of banks) fell 11.4%," Bespoke said. "For that span, only periods during the global financial crisis in 2008, the 2011 debt ceiling chaos, the floating of the Chinese yuan in 2015, and the Covid shock have seen larger drops. In short, this is a historic decline in the market value of banks albeit one that is far from unprecedented."

The stock, which Berkshire Hathaway has steadily accumulated since 2017, is down 12.8% this year. That's not the biggest percentage drop in Berkshire Hathaway's portfolio of roughly 50 U.S.-listed stocks (that's Liberty SiriusXM (LSXMK)). But Bank of America is the costliest loss because Berkshire Hathaway is such a massive owner. The current position's value is down $4.3 billion this year.

Keep in mind that Buffett is now the No. 1 owner of BofA stock. Berkshire Hathaway owns 12.6% of the bank, outranking even ETF giant Vanguard with its 7.6% stake. The only stock Berkshire Hathaway is down nearly as much on as Bank of America, in dollars, is Chevron (CVX). Berkshire Hathaway is also the top holder of the oil giant, with an 8.8% stake. Falling oil prices knocked the value of Chevron down 14.1% this year.

Other bank holdings are hitting Berkshire Hathaway, too. Berkshire Hathaway still owns nearly 10% of Ally Financial, a bank with a large auto loan business. Shares are down 4.4%, erasing $31 million in value this year.

Berkshire Hathaway, though, has fortuitously lightened its holdings on some banks. Those moves are paying off now. Buffett's holding company now only owns less than 1% of U.S. Bancorp, one of the many dogs it's been unloading. Berkshire Hathaway started selling shares of the bank mid-last-year and dumped nearly all the shares in late 2022. It's a good thing. Shares are down nearly 17% this year, erasing nearly $48 million off Berkshire Hathaway's tiny remaining position. 041b061a72


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