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Wow, what a market. On July 19 we saw the Dow Jones Industrials hit 14,000 and everyone expected it to race to 15,000. Sub prime and credit worries have now interrupted the rally putting the DJIA about 6% off its highs.

Financials

It has been a little over a month ago since I wrote my post on finding value in financials. Word is now out that financials are selling at low multiples with yields around 5%. Although most banks/financials are attractive, I decided to buy a position in US Bancorp (NYSE:USB). With a market cap of 50 Billion, I figured it has more room to grow than Bank of America (NYSE:BAC) or Citigroup (NYSE:C).

USB has less than 5% exposure to the sub prime market and is a very efficient operator with ROE of 21% and ROA of 2%+. I believe the industry average is 15% and 1.6% but I will have to double check these numbers. Along with being efficient, USB has a great history of raising and paying dividends. Dividends have been paid since 1863 [not a typo] and now yield a healthy 5.30%.

Housing

I am taking a good look at homebuilding stocks. They are down to levels I did not think they would reach. The expectations for these companies are so low, they are getting priced as if they will not survive past this slump. I am looking at Beazer Homes (NYSE:BZH) and Toll Brothers (NYSE:TOL), but will first do more homework on them before recommending or buying them.

Expectations Investing

Expectations Investing by Alfred Rappaport and Michael Mauboussin is the book I am currently reading. So far I have only read up to Chapter 1 and have been very impressed with the philosophy they present. The philosophy can best be explained by the following Wayne Gretzky quote: "Skate to where the puck is going to be, not where it is."

Source: A Glance At US Bancorp and Homebuilder Stocks