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Brian Gorban
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Brian Gorban has been an active investor for almost twenty years. Mr. Gorban is a graduate from the University of California, Berkeley in 2005 with a degree in Economics and minor in Business Administration from the Haas School of Business (Finance Focus). Upon his graduation, he worked as an... More
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Financial blog/advice
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  • Using ETF's to Take advantage of depressed Financial Stocks

    As financial stocks continue to move lower, one has to believe that the expectations are very low and that the stocks are looking cheap.  However, one would be hard-pressed to identify which one individually is cheap due to their opaque financial statements and unknown exposure to the deteriorating European Union and residential real estate market.  Citigroup looks ridiculously cheap trading at 8.5x price/earnings, 1.3x price/sales, and .45x price/book, but then when one looks deeper, Bank of America on a valuation basis looks real cheap as well trading under 1x price/sales and .35x price/book.  Start moving internationally and one will see quality banks such as Banco Santander and Barclays there selling at real cheap levels as well, which I wrote about here recently (http://seekingalpha.com/article/292226-12-international-stocks-worth-a-look).  However, as I wrote recently here regarding Bank of America (http://seekingalpha.com/article/292316-berkshire-hathaway-is-the-real-winner-in-the-bank-of-america-deal) and surely for other financial stocks, some of these companies may be trading at depressed levels for good reason as the risks being reported are very real and will cause material damage when the dust settles.  So, I've come to the reality that I can't pick specifically which financials have the most value, but I see that the financial sector as a whole is on sale when I look at the metrics on the broad-based Russell 1000 Financial Services Index.  There we see that the average financial company is trading at a cheap 1x price/book, approximately 20% lower the 10-year average, and currently have a respectable 2.1% dividend yield .  Therefore, I see why risk picking individual stocks and just look towards an Exchange Traded Fund (ETF) as an investment vehicle.

    For those who don't know, an ETF allows an investor to invest real cheaply into a fund that mirrors an exchange, sector, or some other focus of the particular fund.  A very popular ETF, for example, is the SPDR S&P 500 which allows investors to buy into a fund that corresponds to the well-known S&P 500 index.  The advantages is its high liquidity as close to 285 million shares trade daily on average and its very low expense fee of .1% among other factors.  In this case, since I'm focused specifically on financials, I'd be better served in buying the Financial Select Sector SPDR Fund (XLF) as it's holdings are comprised of a basket of financials including Wells Fargo, JP Morgan Chase, Citigroup, Goldman Sachs, Bank of America, and others.  To buy these stocks individually would be very hard to manage, cost a lot in terms of commission, and impractical.  I feel the still low .2% expense fee is worth the service.  For the more aggressive trader, the Proshares Ultra Financial offers twice the performance of the financial sector and the most aggressive can look at three times the performance with the Direxion Daily Financial Bull 3x shares.  I must state a caveat that there is no guarantee that these ETF's will meet their stated objectives as they have daily resets to try and match their respective objective and these are strictly intended for a holding period no more than one day.  I'm staying away from those for now as the sector is already volatile enough for me, but I think they're worth a look if down the line financials move even lower and present an even stronger buying opportunity. 



    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in XLF over the next 72 hours.

    Additional disclosure: These descriptions of the ETF's are straight from their respective websites and the straight long XLF is a common tool for the investor. The leveraged ETF's are more suitable for short-term traders, so I made that adjustment.
    Tags: C, BAC, SAN, BCS, XLF, UYG, FAS, BRK.A, BRK.B, JPM, GS
    Sep 20 11:52 AM | Link | Comment!
  • Eastman Kodak Explodes Higher, what should we do?
    Wow, the market always knows how to keep us on our toes.  Just when it seemed that the first article I published may have given some lousy advice, solid facts and reasoning looks to have prevailed. Since I published my article on September 1, Eastman Kodak had risen initially from $3.17 to $3.25, but then continued it's slow slide to $2.69 intra-day on September 12.  However, in the last half hour, the stock more than made up for those losses hitting a high of $3.29 before closing at $3.05.  The rally looks to be continuing in the after-hours market as its back up to a $3.25 high on a heavy 500,000+ shares already traded.  There's no specific news that has come out yet, but looks to be related to the patent sale that we brought up in the original article (http://seekingalpha.com/article/291057-eastman-kodak-options-make-money-off-this-volatility-safely)..

    My original thesis still holds where Eastman Kodak's patents alone, make this stock worth at least $5/share on a comparable basis against the Nortel patent buy by Apple, Microsoft, and Research in Motion collectively and the Motorola Mobility sale to Google.  Add in a valuable brand name, revenue generating film business, and valuable real estate regarding its massive headquarters in Rochester which is put at cost on its balance sheet, Eastman Kodak's value finally looks to start being discovered by Mr. Market.




    Disclosure: I am long EK.
    Tags: KODK, MSFT, GOOG, NRTLQ
    Sep 12 5:10 PM | Link | Comment!
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