Opportunity Knocks: Buy These Banks Before Earnings

Opportunity Knocks: Buy These Banks Before Earnings

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in JPM, C, BAC, MS, GS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More…)

The Gist

Wells Fargo & Co. (WFC) is down slightly after reporting earnings Friday. The bank beat expectations yet some concerning statistics caused the stock to slump. Loan growth was lower than expected and the net interest margin came in 2% below last year. This may have created a buying opportunity in the following five banks which are all reporting earnings next week. In the following sections I will lay out my bull case for the banks in question.

Big Banks To Buy Reporting Next Week

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Morgan Stanley (MS) starts it off reporting earnings on the 14th followed by The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) on the 16th. Finally, Bank of America Corporation (BAC) and Citigroup, Inc. (C) report on the 17th. These are the banks I posit are buys next week based on the following analysis.

Bank Sector Fundamentals Appear Solid

Well-known analyst Dick Bove told CNBC’s “Closing Bell” recently,

“Bank earnings could hit a record $ 38 billion in the fourth quarter, while the industry is poised to have a solid 2013.”

Major bank investor Warren Buffett stated,

“The banks will not get this country in trouble, I guarantee it. The capital ratios are huge; the excesses on the asset side have been largely cleared out.”

There are certain experts in the investing field that I listen to when it comes to the banks. Bove and Buffett. These experts have been in the business for a long time. I respect their commentary. These are fairly strong statements from them. I agree and feel this is a definite positive. The banks are still trading at historical lows. If you have a long term-time horizon this is a definite buying opportunity.

The Future Looks Bright

Currently, several indicators are flashing that global growth is for real and 2013 could be another great year for banking stocks. For instance, Alcoa (AA) stated on its recent earnings conference call that the outlook for Chinese growth is much improved. Furthermore, global growth bellwether Danaher Corp. (DHR) predicts higher than expected core revenue growth.

This is good news for global money center banks as they are the source of funding for the growth. This is why you always hear you can’t have a real bull market rally without the financials starting off the party. The uptick in the housing market and the steepening of the yield curve due to demand for long-term capital are strong buy indicators for the banking sector as well.

Banks Provide Plenty Of Bang For The Buck

Banks offers the big discounts to book value, trade for some of the lowest price to free cash flow ratios and have decent 2013 EPS growth estimates.

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BAC trades for 53% of book value while Morgan Stanley trades for 65%, Citigroup for 67%, JPMorgan Chase and Goldman Sachs both trade for 88% of book.

Fed Stress Test Should Be A Positive Catalyst

These banks all have fortress balance sheets with billions in cash and current assets. I posit this year’s stress test will be a buying opportunity just like in 2012 was for most of the banks.

News of the banks passing coupled with announcements of new dividend increases and stock buyback programs being approved should propel the bank stocks higher yet again.

The Bottom Line

I posit this is the calm before the storm. The pullback Friday in these bank stocks is a buying opportunity in my book. These banks still have considerable upside potential, strong fundamentals and catalysts for growth. They all have fortress balance sheets and strong cash flow providing the opportunities for a share buyback programs and/or a dividend increase to be implemented when they pass the stress tests.

If the U.S. housing market continues to improve, these banks seem poised for solid growth. If you choose to start a position in any stock, I suggest layering in a quarter at a time at a minimum to reduce risk.

Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.

U.S. launches safety review of 787 according to the latest editions

U.S. launches safety review of 787 according to the latest issues

WASHINGTON / NEW YORK – The U.S. government ordered a comprehensive review of the latest Boeing passenger jet, the 787 Dreamliner, cited concern over a fire, and other current issues, but on the plane was still safe to fly.

It was unclear how long the review will take or how much it costs ultimately Boeing, but the company was concerned enough that it is a top manager. At a Washington press conference on the problem Boeing shares fell 3 percent.

“There are concerns about the recent events with the Boeing 787′s why we are today, we undertake a comprehensive review are,” Transportation Secretary Ray LaHood said at a news conference by more than 100 journalists from around the world followed .

These concerns notwithstanding, but LaHood also maintained the aircraft was airworthy.

“I think this aircraft is safe and I would absolutely have no concerns on board one of those planes and a flight,” he said.

While the FAA began its review, Boeing customer All Nippon Airways had. One launch of its own, initiating Dreamliner service between Tokyo and Silicon Valley center of San Jose Passengers prepare to board shook every suggestion they might be concerned.

Boeing shares fell 2.7 percent to $ 75 in late trading. Since December 4, when the first of the latest incident took place, the stock is up 1.5 percent, underperforming a 4.3 percent gain in the S & P 500

“Boeing does get a good job before (as much as a company can) the FAA situation. My view is that if the FAA considers this as a non-design problem, Boeing is in order be. If this is a design issue it more difficult, because we have a break, the production to fix the design and then have to go, “said Morningstar analyst Neal Dihora.

CHALLENGE FOR COMMERCIAL CHIEF Boeing

The review will focus on the 787′s electrical systems and cover their design, manufacturing and assembly, said the Federal Aviation Administration.

The move comes on a separate probe by U.S. safety investigators in a battery fire “serious damage” to an empty Japan Airlines 787 jet at the Boston airport causes on Monday. First results of this probe are due next week.

After about 10 to 787 incidents in six weeks, a jet suffered a cracked cockpit window on Friday, while another had an oil leak.

“We are also 100 percent behind the integrity of the 787 and the rigorous process that led the successful certification and entry into service” Boeing CEO Jim McNerney said in a statement on Friday.

The evaluation is an important test for the recently appointed CEO of Boeing’s commercial aircraft division, Ray Conner, who participated on Friday press conference.

“The redundancies, which we have set in this machine are phenomenal and the airplane performed perfectly in this regard. Now we want to make sure that none of them happen again, and that’s what we try to “do, Conner said.

These complex systems, called the Conner are among the advantages of the 787, but also more complicated to find and solve problems, according to the head of the Aeronautical Systems Laboratory at MIT.

“Now you have the dependencies you did not have before. These systems are much better when they work, but they are more difficult to guarantee that they work all the time, and it is more difficult to predict, what will happen if something is not “, R. John Hansman said in an interview.

BOEING TRUST

Boeing 787 comes in the year, the company is in difficult labor negotiations with its engineering union, the workers that are called, would not solve problems with the Dreamliner.

involved

On Friday Boeing made a revised offer that it would have said to increase the pool of money for raises.

Ray Goforth, Director of the Society of Professional Engineering Employees in Aerospace (SPEEA), the FAA declined to comment. He said Boeing latest offer still included drastic cuts in the contract, which expired in November.

The A380 was also to fly as safely and some airlines have reported a dip in bookings, but the problems are expected to end up costing Airbus up to EUR 500 million in repairs.

787 Dreamliner made its first commercial flight down in late 2011 after a series of delays in deliveries of production for more than three years behind schedule. By the end of last year, Boeing had sold 848 Dreamliners. It now has 50 in service.

Yahoo

Fiscal cliff deal bad for future generations

Fiscal cliff deal bad for future generations

By Alex Brill, Special to CNN

Editor’s note: Alex Brill is a research fellow at the American Enterprise Institute and former policy director and chief economist of the House Ways and Means Committee. The views expressed are his own.

The fiscal cliff has been averted, but no one should be patting themselves on the back. Congress managed at the last second to largely avoid tax hikes and to defer automatic across-the-board spending cuts of over $ 100 billion a year. But overall, the machinations before the legislation and the legislation itself are disastrous for five reasons.

First, the deal Senate Minority Leader Mitch McConnell and Vice President Joe Biden helped concoct does more to keep our fiscal trajectory on its current course than it does to establish a path toward manageable deficits and a sustainable debt burden over the long run. The “American Taxpayer Relief Act” is a tax deal that raises taxes relative to the policies in effect in 2012 but does virtually nothing to curb expenditures, even though federal spending on health care alone is scheduled to nearly double as a share of the economy over the next twenty years.

Second, the deal provides only a temporary reprieve from fiscal mayhem. The postponed sequestration is just around the corner in March, and the federal government is set to again reach, in the next few months, the limits of its borrowing capacity, known as the debt limit.

More from CNN: Fiscal cliff winners and losers

This next cliff in theory offers the opportunity for much-needed entitlement reform. Some of the necessary structural reforms to Medicare and Social Security are already clearly identified, and Republican Members of Congress certainly hope they will be part of the next fiscal package. But that thinking is likely to prove naïve, given the third reason the recent fiscal cliff deal was a disaster: the machinations surrounding the deal have created a more polarized atmosphere than ever. Both the Left and the Right are determined to compromise even less next time. Republicans have given all the ground they will on taxes. And Democrats didn’t cut spending this time around and will have no greater incentive to do so in a couple of months.

The fourth sign of disaster is that this deal represents yet one more failure of Congress to achieve any of the politically difficult changes that are absolutely necessary to our country’s fiscal future. The fact that the deal only took the edge off of our growing fiscal problems suggests that in 2013 Congress will again find it too difficult to achieve meaningful reform.

More from CNN: Cliff deal filled with pork

But the fault does not lie entirely with the legislative branch. Major structural entitlement and tax reform will require tremendous presidential leadership, which brings us to the fifth reason this deal is bad: President Obama proved unable to effectively negotiate with Republicans. After the November election, Congressional Republicans expressed a clear willingness to compromise on taxes in exchange for spending reforms. The president will need to show a similar willingness for compromise if real fiscal reform is going to materialize in the near term. Any grand bargain aimed at stabilizing the long-run debt outlook will necessarily be a disappointment to progressives seeking an ever-increasing social safety net and may also require tax changes that adversely affect more than just the richest 1 percent among us.

It is time for our federal government to begin transitioning toward sustainable budgets, a reality that demands difficult choices about taxes and entitlements. Undoubtedly such a deal will have implications for future elections, but the decision to act must be cast not in political terms, but rather as a generational issue. Failure to curb our deficits and reform unsustainable entitlement spending means passing greater debt burdens on to future generations. Democrats and Republicans have the opportunity to reverse this trend and claim credit. Short-term political discomfort could yield long-run political benefits. Sadly, the deal struck this week in Congress maintains the trend of $ 1 trillion deficits for at least another year while continuing to ensure that federal health care spending a generation from now will be untenable.

Wall Street Week Ahead: Attention turns financial results

Wall Street Week Ahead: Attention turns to financial results

NEW YORK – After more than a month to watch Capitol Hill and Pennsylvania Avenue, Wall Street is again what it knows best: Wall Street

big investment banks and commercial banks -. –

The first full week of earnings season is dominated by the financial sector, as private investors, free of the “fiscal cliff” worries have started to get back into the markets

Shares have risen in the new year rally after the first resolution of the year cliff in Washington on 2 January. The S & P 500 on Friday its second straight week of gains, making it only slightly away from a high five-year success rate closing price on Thursday.

“What we are looking for that demand. Demand from small businesses, to consumers is.”

RESULTS AND Economic Sentiment

investors were greeted with a slightly better than expected first week of the result, but the expectations were low and only a few companies reported results.

in the fourth quarter profit and revenue for S & P 500 companies are both expected to grow by 1.9 percent in the quarter, according to Thomson Reuters I / B / E / S

A few large corporations have reported on with Wells Fargo Bank, the first out of the gate Friday, your record a profit. The bank, however, made fewer mortgage loans than in the third quarter, and its shares fell 0.8 percent for the day.

, a gauge of U.S. bank stocks, is up to 30 percent increase from a low hit in June in six of the past eight months, including January.

investors will continue to see gains on Friday as General Electric completes the week after Intel’s report on Thursday.

residential, industrial DATA ON TAP

Next week is also the release of a wide range of economic data.

Tuesday the release of retail sales figures and the Empire State Manufacturing Index is seen, followed by CPI data on Wednesday.

investors and analysts will also focus on the housing starts figures and the Philadelphia Fed factory activity index on Thursday. The Thomson Reuters / University of Michigan consumer sentiment figures on Friday.

“You are not surprisingly so, if they are good, they will be more eye-catching, if they are not good,” he said. “The underlying drive of the markets, I think the economic data. That’s the catalyst.”

worry about the fiscal cliff lengthy negotiations, the markets went in the weeks before the ultimate second January resolution, but fear of the debt ceiling fight is not yet command the attention of investors to the same extent.

The agreement was probably part of the reason for a rebound in flows to equities. U.S. equity funds earned $ 7530000000 ninth resolution to the cliff in the week ending January. In a week since May 01, according to Thomson Reuters Lipper

Move

The deal in Washington to avoid the cliff up another debt battle playing in the coming months, in addition to spending debates. But this alarm sounded previously.

The CBOE Volatility Index <. vix> a gauge of traders fear is, from more than 25 percent so far this month and has recently hit the lowest level since June 07, before the start of the recession.

“The market does not react to the same news twice. It will be more brutal than the fiscal cliff,” said Krosby. “The market has been conditioned that in the end, they come to an agreement.”

From Yahoo