I expect to get slammed for this article; however, since it is my article and my opinion, I guess I can take the heat. It is the holiday season, so be a little easy on me.
I am going out on a limb today by suggesting that if you are looking to add some financials to a well-diversified, balanced portfolio, now is the time to buy them.
Why Buy Now
- The eurozone issue is abating more than before and looks like it might be less of a headwind and hopefully less headline-grabbing.
- The housing market might be in the initial stages of recovery by the new housing starts uptick.
- Overall unemployment rates are dropping a bit, nationally, which means more folks could potentially afford to borrow when the banks ease up on lending for mortgages (first mortgages).
- Interest rates could be bottoming out over the next 6 months giving banks more incentive to actually lend in various areas and therefore be able to grow revenues and profits from that lagging end of the business.
- Banks will eventually have to compete with the venture capitalists for new business loans as lending rates increase
- The economy seems to be recovering here in the US, and financials have lagged rather than led; I feel that is about to change.
- Our government is adding additional pressure on banks to lend, as well as to clean up balance sheets, which will obviously make them much more desirable investments.
Which Bank Stocks to Consider Buying Now
Bank of America (BAC):
Dividend Yield: N/A,
ESS Rating: Neutral
Talk about catching a falling knife -- BAC has been miserable for so long I cannot recall when it was not. That being said, how much further below BV can it fall, and why? We already know about all the legal issues, all the mortgage fiascoes, as well as the overall disgust with their management and the taxpayer bailouts.
Well, yes, it all seems to stink, but when is a better time to accumulate when everyone else is a hater? To me it makes sense to begin dabbling here at these silly low prices to be in a position to profit when sentiment changes -- and it will, as it always does.
BAC is cheap enough right now for a risk basket, in my opinion. Using about 2-5% of cash reserves above the core holdings and separate, BAC could be a double or triple in 12-18 months.
Dividend Yield: tiny
ESS Rating: Neutral
Another despised, hated, and unwanted stock. Sounds like a buy right there as a contrarian! Seriously, though, C has performed better than BAC and has faced similar issues. It has seen the abyss, and as financials lead again, C will be right there for us to pick at.
Why wait for it to pop 25% before recognizing that Citigroup could actually lead the way out of the darkness and back into the light?
At these prices, again, I believe we are getting our risk money in at a good time.
Contrary to all the naysayers, apocalyptic doomsters who believe we are headed for more (even worse) trouble, especially in the first half of 2012, I simply say no, I don't buy it.
There are 10 trillion reasons to disagree with me, and that is perhaps the biggest reason for me to think I am right about this. Too many people are ignoring too many very positive signs that seem to indicate that we are regaining our financial footing.
Obviously financials have led the way for our markets in the past, and I see no reason for them not to do the same in 2012. It might just be the place to be for some really major gains.
Disclaimer: Please do your own research and do not buy or sell any security based on opinions expressed here. Your personal investment needs and goals, as well as risk tolerance should always be evaluated beforehand.
Disclosure: I am long BAC.