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%.
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 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."