Emerging Winners From The Financial Crisis
July 14, 2009 14:19
With today's news of Goldman Sach's (GS) strong second quarter results, it is becoming clear that the financial industry's survivors are going to be big winners. To find out which companies are worth evaluating, I asked one of Marketocracy's mFOLIO Masters, Eugene Groysman, for his best idea.
He surprised me by picking US Bancorp over better known rivals Goldman Sachs, Bank of America (BAC), Citibank (C), Morgan Stanley (MS) and JP Morgan (JPM). I'm going to let him explain in his words why US Bancorp is his pick
US Bancorp (USB)
By Eugene Groysman
When one thinks of banks, the first gut reaction would be to run for the hills. Who in their right mind would buy stock in any banks today, right? Well you would be wrong. There are many banks that are solid players in the financial recovery we are seeing. One of them is US Bancorp, which has been solid through-out the entire banking fiasco. It's true they took TARP money, but have paid off their TARP funds' equaling about $6.6 Billion and the company has never failed to pay a dividend to stock holders. US Bancorp is considered a spend thrift type of Company, they rarely spend money other than to acquire other banks or to pay stock holders.
It is true US Bancorp took TARP monies equaling $6.6 Billion in November 2008, but on the 22nd of the same month US Bancorp was able to purchase two small regional banks in Arizona and California, Downey Financial Corp, and PFF Bank &Trust. These acquisitions helped increase market share for US Bancorp in those two states. The ability to acquire new assets during these sets of circumstances shows that the company is being run in the stock holder's best long-term interests.
The stock price its self is looking more and more attractive. The 52 week trading range for this stock is from $8.06 to $42.23. That is large trading range, nearly 500%. In my opinion the only reason why the stock even got that low was due in most part to the over-all financial debacle. The current price is right around $18, and has been pretty steady in a nice trading range in the last month peaking at about $19 and bottoming at $17. The highs and lows for this stock are getting tighter and tighter and I for see a breakout into the high twenties, and by the 1stQ of next year it could break into the mid thirties.
The during the bleakest moments of the this latest market fall and with its price falling to all time lows, US Bancorp continued to pay $1.40 per share. For a company to be able to do that means that they have spare cash laying about after all is said and done. After they took the TARP monies, they decided to slash dividends for the time being to preserve capital so they would be able to pay off TARP sooner than later. This measure proved prudent, because as of the beginning of June, US Bancorp was able to repay the $6.6 Billion they received from the Fed. With TARP repaid, it looks like US Bancorp will be the first large bank to meaningfully boost its dividend. However, it might not hit the high notes just yet, but with recovery comes a brighter out look for dividends.
This stock is poised for a solid run in the next couple of years. With sound judgments by management, stock growth and the likelihood of meaningful dividend increases, makes this stock a solid long-term play. Anytime you can pickup a solid company trading off its high by 42% heading into a recovery, with the sites set on higher dividends, it would be wise to buy.
He surprised me by picking US Bancorp over better known rivals Goldman Sachs, Bank of America (BAC), Citibank (C), Morgan Stanley (MS) and JP Morgan (JPM). I'm going to let him explain in his words why US Bancorp is his pick
US Bancorp (USB)
By Eugene Groysman
When one thinks of banks, the first gut reaction would be to run for the hills. Who in their right mind would buy stock in any banks today, right? Well you would be wrong. There are many banks that are solid players in the financial recovery we are seeing. One of them is US Bancorp, which has been solid through-out the entire banking fiasco. It's true they took TARP money, but have paid off their TARP funds' equaling about $6.6 Billion and the company has never failed to pay a dividend to stock holders. US Bancorp is considered a spend thrift type of Company, they rarely spend money other than to acquire other banks or to pay stock holders.
It is true US Bancorp took TARP monies equaling $6.6 Billion in November 2008, but on the 22nd of the same month US Bancorp was able to purchase two small regional banks in Arizona and California, Downey Financial Corp, and PFF Bank &Trust. These acquisitions helped increase market share for US Bancorp in those two states. The ability to acquire new assets during these sets of circumstances shows that the company is being run in the stock holder's best long-term interests.
The stock price its self is looking more and more attractive. The 52 week trading range for this stock is from $8.06 to $42.23. That is large trading range, nearly 500%. In my opinion the only reason why the stock even got that low was due in most part to the over-all financial debacle. The current price is right around $18, and has been pretty steady in a nice trading range in the last month peaking at about $19 and bottoming at $17. The highs and lows for this stock are getting tighter and tighter and I for see a breakout into the high twenties, and by the 1stQ of next year it could break into the mid thirties.
The during the bleakest moments of the this latest market fall and with its price falling to all time lows, US Bancorp continued to pay $1.40 per share. For a company to be able to do that means that they have spare cash laying about after all is said and done. After they took the TARP monies, they decided to slash dividends for the time being to preserve capital so they would be able to pay off TARP sooner than later. This measure proved prudent, because as of the beginning of June, US Bancorp was able to repay the $6.6 Billion they received from the Fed. With TARP repaid, it looks like US Bancorp will be the first large bank to meaningfully boost its dividend. However, it might not hit the high notes just yet, but with recovery comes a brighter out look for dividends.
This stock is poised for a solid run in the next couple of years. With sound judgments by management, stock growth and the likelihood of meaningful dividend increases, makes this stock a solid long-term play. Anytime you can pickup a solid company trading off its high by 42% heading into a recovery, with the sites set on higher dividends, it would be wise to buy.