- (0:20) - Finding Value In The Banks
- (3:15) - Screener For Big Bank Stocks
- (9:00) - High Growth Niche Banks
- (18:45) - Episode Roundup: JPM, WFC, OZK, FRC, CMA
Welcome to Episode #112 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
With the Dow Jones Industrial Average hitting new all-time highs again, value investors are asking: where should they be looking for value stocks?
Alas, they’re not being found in the technology sector.
But the financials, especially the banks, have been ignored in 2018. In recent weeks, the bank stocks have sold off making them even cheaper relative to the S&P 500.
But how do you screen for bank stocks?
How to Screen for Bank Stocks
On Zacks’ stock screener, investors can screen for sector and industries within that sector.
One of those is Major-Regional Banks. Currently, Zacks has 16 banks in that category.
But using the Zacks Rank to narrow it further doesn’t get you far right now as 14 of the 16 are Zacks Rank #3 (Hold) stocks and the other 2 are Zacks Rank #4 (Sell).
Additionally, none of those big banks are super cheap. None have P/Es under 10 and only one had a P/B ratio under 2.
So now what?
Most investors know the Big Four banks: Wells Fargo, Bank of America, Citigroup and JP Morgan.
Tracey then took a look at a few “niche” banks that she’s run across over the last few years. There’s no way to screen for them, but they’re banks you may want to take a closer look at.
5 Banks to Keep on Your Short List
1. JP Morgan Chase & Co. (JPM - Free Report) is considered among the best of the larger international banks by the analysts. Wall Street thinks so too as its shares are actually up 5.6% year-to-date, instead of being in the red like many other bank stocks. It’s cheap, with a forward P/E of 12.4.
2. Wells Fargo (WFC - Free Report) has been in hot water recently and the shares reflect that as they have fallen nearly 15% year-to-date. But for those interested in the turnaround, they trade with a forward P/E of just 12.1. Shareholders are also rewarded for their patience with a dividend currently yielding 3.3%.
3. Bank OZK (OZK - Free Report) is trying to shed its Arkansas image by rebranding. It’s still a growth story as its expected to grow earnings by 22% this year and revenue by 8.5%. Investors have been fleeing in 2018, with shares down nearly 22% year-to-date. That has made OZK among the cheaper banks with a forward P/E of just 10.4. With the growth and low P/E it has a PEG ratio of only 0.9.
4. First Republic Bank (FRC - Free Report) is a little-known private banking and wealth management bank headquartered in San Francisco with a market cap of $14 billion. Like Bank OZK, it is also a growth story. Earnings are expected to jump 11% in 2018 while revenues are forecast to rise 15.8%. It’s not the cheapest of the banks, however, with a forward P/E of 19.8.
5. Comerica (CMA - Free Report) is headquartered in one of the strongest states economically: Texas. It is located in 7 out of the 10 largest cities in the US. Earnings are expected to be up double digits this year and next. It has a PEG ratio of just 0.6, which means it has the rare combination of growth and value.
All of the banks are set to report earnings again shortly, including the five listed here.
Investors should be sure to tune into those reports and conference calls.
What else should you know about investing in the bank stocks?
Tune into this week’s podcast to find out.
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