Financial stocks are all over the board, with a lot seeming to be not worth the time, some downright pug-ugly bad while a few diamonds still shine amid the dross. I analyzed these five financial stocks to see where each one ranks, and see if any of them are are a good buy right now.
Alleghany Corporation (NYSE:Y) has a recent price of about $285 which sits it at the lower end of a 52-week trading range of between $277.03-$340.91. That hefty price is supported by earnings per share around $15.88 with a price earnings ratio of 17.90. Its market cap stands at $7 billion. Alleghany won a bidding war to buy reinsurer Transatlantic Holdings ((NYSE:TRH). A lot of the market believes Alleghany paid too much and speculators are shorting Alleghany hard with more than 10% of its shares outstanding being on the shorted list. Long term the transaction looks like a good fit, but short term costs will probably rise while the deal sorts itself out. Plus Alleghany tied itself to a $127 million cancel fee if closing the transaction fails in the next several months.
CIT Group, Inc (NYSE:CIT) has a current share price of around $37 which is mid-range to its 52-week trading of $27.68-$49.57 giving it a price earnings ratio above the stratosphere at 74.50 and a price to cash flow at 71.70. The problem here is that CIT recovered from a real estate crash induced bankruptcy in 2010. After showing a bump of good numbers in its December 2010 and March 2011 quarterly reports, the most recent two quarters have been negative. In fact net earnings per share for the first three quarters an anemic $0.02 a share. Shareholders are betting big that the next quarterly announcement shows a turnaround. If they are wrong it will be a bloody start to 2012. Unfortunately, it looks like all possible good news is already priced in, so if you don't already own it you should pass.
Cohen & Steers (NYSE:CNS) weighs in at a recent share price of around $30 which also is about the middle of its $23.79-$40.93 trading range. Earnings per share come in at $1.16 and a price earnings ratio of 26.2 while its dividend provides a yield of 1.97%. Revenue growth year over year has been a strong 39% and dividend funding is a reasonable 50% and most impressively the company is free of long term debt. It is arguably the most fundamentally sound of these five financial stocks and is well positioned to grow. It would be a conservative investment with good long term upside while short term it should remain relatively safe from any continued market weakness.
American International Group, Inc (NYSE:AIG) comes in at a share price of about $25 which is near the bottom of its 52-week trading range of $19.18-$59.85. It has great numbers with an earnings per share of $10.05 and a miniscule price earnings ratio of only 2.5. The numbers come as investors begin to worry that their big dreams for AIG might be fading away. AIG had a big run up in stock price when numerous market analysts forecast that AIG would rebound from a huge first quarter 2011 loss and return back to profitability at the start of 2012. Now, pundits are warning of lower earnings due to the dead weight of the European credit crisis and AIG stock is bleeding. With earnings reports just around the corner, it is a good idea to wait to see what AIG has to report before any investor gets involved in this stock.
Our last company is Affiliated Managers Group (NYSE:AMG), which carries a stock price around $98 within a 52-week trading range of $70.27-$113, having slowly regaining lost ground after a market related sell off in August 2011. It carries a price earnings ratio of 27.94 based on earnings per share of $3.53. Where it separates itself from most financial firms has been its ability to continue to pump out real profits despite the rocky environment of the last few years. Its margins range quite a bit higher than the industry average, pre-tax margin runs 28.40 compared to the industry 16.80 and its solid management shows no sign of slowing down. However its current price carries a bit of a premium right now because of its safety.
Of these five, the most conservative investors will want to take a piece of Affiliated Managers. However, over all there is a better opportunity with Cohen & Steers due to its reliable dividend and lack of long term debt. More aggressive investors with long term horizons might consider Alleghany for when the Transnational purchase starts to pay off.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.