Viking Posted June 9, 2015 Share Posted June 9, 2015 It looks like sentiment is slowly getting more positive in U.S. large cap banks, especially BAC, Citi and JPM. My thesis with large cap US bank stocks is over the next couple of years we are going to get 1.) increased earnings 2.) lower share count (as excess capital is used to buy back stock) 3.) sentiment change resulting in Mr Market paying higher PE multiple When these 3 things happen at the same time stocks often move 30-50% over 24-36 months. My guess is we are still in the early days in the increase in stock prices of companies in this sector. Over the past 8 years the vast majority of the coverage has focussed on issues: capital issues, credit losses, litigation losses and/or regulatory burden. All of these issues caused earnings to suffer, muted growth rates (top and bottom line) and this resulted in Mr Market valuing the sector with a below market PE multiple. Mike Mayo: "more positive on bank stocks than anytime in the past 16 years" A: asset quality is stronger than its been in the last decade B: balance sheets are stronger than they have been in two decades C: capital is stronger than it has been in 5 decades Litigation: in 8th or 9th inning Regulation: has hurt earnings growth but has also dramatically reduced risk; not a terrible trade off Earnings stability: much, much better than the past Link to comment Share on other sites More sharing options...
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!Register a new account
Already have an account? Sign in here.Sign In Now