Seeking Alpha

I'd be buying bank stocks "hand over fist," says banking analyst Dick Bove. "On a fundamental...

I'd be buying bank stocks "hand over fist," says banking analyst Dick Bove. "On a fundamental basis, it's almost impossible to believe that these stocks are not dramatically underpriced." As he sees it, investors should be taking advantage of the turmoil in Europe to buy, not sell every time the market "freaks out" over fears of the sovereign debt crisis spreading. His picks: Bank of America (BAC), Morgan Stanley (MS), State Street (STT) and US Bancorp (USB).
From other sites
Comments (59)
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    Why are there continually posts about how great bank stocks are now, especially from this clown?

     

    His picks sure have turned out great.... http://bit.ly/uXgtoj
    18 Nov 2011, 06:59 PM Reply Like
  • Chris Kent
    , contributor
    Comments (276) | Send Message
     
    You are dead on with this comment. I agree. Bove is, more or less, an idiot.... at least with regard to financials and banks.
    18 Nov 2011, 10:52 PM Reply Like
  • jsmunroe59
    , contributor
    Comments (89) | Send Message
     
    If I would have had the liquidity in the 80's to buy BAC when it was making horrific investments in So. America, I'd be retired today and very wealthy. He is correct. NOW is the buying time for these stocks UNLESS they go under due to undisclosed significant exposures/investments in EU sovereign debt. If we can get the banks to come clean with their exposures, we could feel better about a LONG investment in them. Reminds me of WAMU 4 years ago stating that it had reserved enough to cover it's risk with sub-prime mortgages. Shortly thereafter it declared bankruptcy and with it, 5% of my estate vanished. So, I say force the banks into disclosure and hold them accountable for what they declare. With that, we are better equipped to know if Bove hit a home run this time.
    19 Nov 2011, 10:05 AM Reply Like
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    Good luck getting banks to disclose all of their exposure and to actually do accounting practices that make sense
    19 Nov 2011, 12:03 PM Reply Like
  • Paul Price
    , contributor
    Comments (1516) | Send Message
     
    He also said on TV that he owns NONE of them personally.
    18 Nov 2011, 07:04 PM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Paul Price,

     

    While I don't care for Bove, either, if you read the article, it plainly states that he's not allowed to buy the stocks he talks about for regulatory reasons.

     

    I did hear him speak on the radio today, and he said essentially the same thing as he said in the article, although, on the air, he suggested some regional banks that would have no international exposure ( I think that Key Corp. was one...don't recall the other 2 that he mentioned).

     

    Personally, I'm not holding any bank stocks, and haven't in a couple of years.
    18 Nov 2011, 07:37 PM Reply Like
  • Chris Kent
    , contributor
    Comments (276) | Send Message
     
    If his comments were directed at regionals, I'll give him some credit. They have some upside.
    18 Nov 2011, 10:54 PM Reply Like
  • Uber Vandal
    , contributor
    Comments (296) | Send Message
     
    Should be a lot of "upside" to Anchor Bank (ABCW), and it is even regional to boot!!

     

    In fact, it went down 54.65% today, to $0.222 per share.
    19 Nov 2011, 01:19 AM Reply Like
  • Joe Eifrid
    , contributor
    Comments (342) | Send Message
     
    ABCW? Modified Texas ratio of 163. It's peers average 34. (Lower numbers are better). 11.6% of it's assets are NON-performing! Negative shareholder equity.
    I think I will pass even at 22 cents....

     

    Second thought....delisted and going to the pinks? With the games and manipulation that can be played there maybe they do get a bounce before they go under.
    19 Nov 2011, 07:54 AM Reply Like
  • Fueled By Randomness
    , contributor
    Comments (292) | Send Message
     
    I heard Marty Zweig say years ago, "I don't like banks. You never know WHAT'S on their balance sheet." Boy, was that guy ever prescient.
    19 Nov 2011, 08:41 AM Reply Like
  • Bouchart
    , contributor
    Comments (803) | Send Message
     
    There might be a few local banks that don't conduct international business that might be worth buying. But his picks are ridiculously stupid.
    18 Nov 2011, 07:08 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    Just one of the countless thousands of reasons why Wall Street needs to implode. In a sane/rational world, there would be consequences for a rube like Bove going on national television day after day and lying to millions of people. But nope, not in our crony world.
    18 Nov 2011, 07:10 PM Reply Like
  • surfnspy
    , contributor
    Comments (415) | Send Message
     
    What a Dick.
    18 Nov 2011, 07:12 PM Reply Like
  • J 457
    , contributor
    Comments (952) | Send Message
     
    At least he's consistent............... wrong. Go Lehman!
    18 Nov 2011, 07:13 PM Reply Like
  • bricki
    , contributor
    Comments (1099) | Send Message
     
    They may be undervalued but they may stay that way for much longer than you can wait. Just like housing.
    18 Nov 2011, 07:21 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    If that were the case, they'd be "fairly valued." They're not that either. They're overvalued. They're worthless.
    18 Nov 2011, 07:28 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (3539) | Send Message
     
    look at the 10 year performance of Australian and Canadian banks vs. American ones. Why even bother with American bank stocks when America's whole banking system is broken?
    18 Nov 2011, 07:23 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    Exactly. Bravo, Uncle Pie.
    18 Nov 2011, 07:28 PM Reply Like
  • The Enterprising Value Inve...
    , contributor
    Comments (553) | Send Message
     
    You could have said that about american banks leading up to 2008, genius.....

     

    So you recommend buying shares in banks where property prices are in bubble territory (similar or higher than where US housing prices were) but where the prices for those assets haven't come down yet. So let me get this straight, you want to recommend banks who hold assets that could be vastly overvalued, vs ones where the assets have already reset?

     

    Wanna make a bet that US banks will outperform Australian ones over the next 10 years???
    18 Nov 2011, 07:58 PM Reply Like
  • Chris Kent
    , contributor
    Comments (276) | Send Message
     
    Its funny, you think we would have learned our lesson with Tyco and Koslowski, Enron, (etc, etc, etc) and the fall of Arthur Anderson.... its all about full disclosure and proper accounting, but for some reason, those ideals don't apply to banks and financial institutions of this magnitude, which are the ones that pose the greatest risk to our system.
    18 Nov 2011, 10:58 PM Reply Like
  • mP1
    , contributor
    Comments (386) | Send Message
     
    All 4 big Australian banks made 25B this past year. Europe and America wish they had banks like this. Not a single bank required any government money and none went belly up.
    19 Nov 2011, 12:45 AM Reply Like
  • Michael Allen
    , contributor
    Comments (159) | Send Message
     
    Whoa! Where do you get the idea that American banks assets have been reset?
    19 Nov 2011, 03:26 AM Reply Like
  • Buckoux
    , contributor
    Comments (6796) | Send Message
     
    "...but for some reason, those ideals don't apply to banks and financial institutions..."

     

    They don't apply when banks are doing the bidding of bad government.
    19 Nov 2011, 01:42 PM Reply Like
  • maudie
    , contributor
    Comments (482) | Send Message
     
    "I'd be"? or "I bought"?
    18 Nov 2011, 07:28 PM Reply Like
  • Cherry Picker
    , contributor
    Comments (383) | Send Message
     
    If you believe the Euro will disappear then Bove is wrong. If you believe that the euro-drama will drag on for months and eventually be resolved by institution of a stronger framework forced and enforced by governments and bankers around the world, then no matter how wrong Bove has been in the past, he may finally be right--especially when most of the hedge fund morons have thrown in the towel. There is definitely blood in the streets. When have bankers ever been held in lower regard? TBTF has been held in complete contempt since it was instituted to save the American banking industry. TBTF WILL be applied to Europe no matter how much we hate it. Will it be a conspiracy in the narrowest definition of the term?
    Hell yes! Will all of that matter? No. China, the US and the international cartel will not let the Eurozone implode because it will cause an economic catastrophe that will dwarf all others. WW II got us out of the great depression. This iteration will be the opposite. International cooperation on an unprecedented scale.
    18 Nov 2011, 07:36 PM Reply Like
  • optionmike
    , contributor
    Comments (86) | Send Message
     
    i agree that massive coordinated stimulus trumps all other fundamental reasoning for being bearish (short term), what the EU does not have however is months or possibly even weeks to figure this out, time is running out faster than a coordinated plan can be put in place and agreeing to austerity measures and upping insignificant EU purchases of PIIGS bond auctions is not going to cut it
    18 Nov 2011, 08:41 PM Reply Like
  • dacama1
    , contributor
    Comments (220) | Send Message
     
    Bove doesn't know dick......H/T ZH
    18 Nov 2011, 07:38 PM Reply Like
  • Joe Dirnfeld
    , contributor
    Comments (1128) | Send Message
     
    Yeah Bove is right, if you want to make money, gotta be a contrarian. JP Morgan would be my choice, trading at tangible book, and best CEO in the industry. Pays dividend of 1$ per share, yielding over 3%.
    18 Nov 2011, 07:52 PM Reply Like
  • Ted Bear
    , contributor
    Comments (635) | Send Message
     
    Cherry...it's all just kicking the can down the road.

     

    Joe....you think you can actually calculate the 'book value' of any of these banks without putting the balance sheet back together? That's quite a feat!

     

    We can 'play' cooperation, and we can pretend that certain assets don't matter, but at the end of the day investors know better. These things are value traps with no outcome in sight as long as we refuse to face up to our economic problems and stop pretending we can borrow or print our way out of a self induced debt crisis.

     

    We have demonstrated an ability to postpone the inevitable by sacrificing employment, but at the end of the day you can't have economic recovery and good fortune for the banks until we come clean on the true valule of the assets which they hold.....much of which are worthless...or even less.

     

    There is a reason Bank of America raised all the capital they could get their hands on (at exhorbinant rates), while protesting that they didn't need any fresh capital. There's an expression...watch what i do...not what i say. That is VERY telling, and Bove might do well to pay attention to it.
    18 Nov 2011, 08:09 PM Reply Like
  • deercreekvols
    , contributor
    Comments (6803) | Send Message
     
    Warren Buffet adds to his position of WFC and this guys doesn't mention Wells Fargo.
    Let's see. Follow Mr. Buffet and buy or add WFC, or follow Mr. Bove.
    Doesn't seem too hard to figure this one out.
    I am long WFC.
    18 Nov 2011, 08:15 PM Reply Like
  • EMS
    , contributor
    Comments (582) | Send Message
     
    BAC probably headed to zero.
    18 Nov 2011, 08:48 PM Reply Like
  • GoingLong
    , contributor
    Comments (154) | Send Message
     
    I agree with Dick Bove. At these prices there is great upside potential. It comes down to risk/reward. The economy will not recover without the banks and to get them at these levels make them a buy for me. I purchased BAC and WFC. There is only two good reasons to bash the banks... if you were fired by one of them and or if you are shorting them. Otherwise it is un-American to be so negative. We need them and they need us.
    19 Nov 2011, 02:05 PM Reply Like
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    We don't need them, there are more sound banks that I would rather keep money in or invest in. And they don't need us, they have all the money they want from the FED at 0% plus bailouts when they make "mistakes"
    19 Nov 2011, 02:12 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    You don't need your jugular vein either I suppose.
    19 Nov 2011, 07:46 PM Reply Like
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    Huh? I'm saying there are more sound banks as to keep money in or invest in. Obviously, I am referring to certain regional banks. You also recommended smaller banks in a couple posts below.
    19 Nov 2011, 09:18 PM Reply Like
  • Ryan Freund
    , contributor
    Comments (115) | Send Message
     
    It's un-American to exercise your first amendment rights? Interesting. You, sir, are a complete moron!
    20 Nov 2011, 01:15 PM Reply Like
  • mP1
    , contributor
    Comments (386) | Send Message
     
    http://bbc.in/t98k7F

     

    Russia, Khazakstan and Belarus are preparing for a Euro style monetary union...
    19 Nov 2011, 12:46 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    A lot of emotion on this board hating on the banks. That is usually when it makes sense to take a second look. I recall past down cycles of the banks but eventually they bounced back.

     

    Seems to me that the banks will do as well as the US economy and vice versa. Betting on the banks is betting on the US. If the US tanks so will the banks but at that point there will be no safe harbor outside of gold, silver and oil and other commodities.
    19 Nov 2011, 01:14 AM Reply Like
  • EMS
    , contributor
    Comments (582) | Send Message
     
    BAC has not been a good choice for like the past 5 years. I've been saying that all along, not jumping on the broken band wagon now, I assure you. So may not want to use me and the current anti-bank speech now as your barometer for a counter-intuitive trade. I guess you've been dip-buyin' all long. I guess you missed that axiom about markets ad their intrinsic ir/rationality.
    19 Nov 2011, 09:09 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    EMS

     

    There are hundreds of banks to buy besides BAC. I would not buy a large cap bank anyways as they have no way to grow.

     

    Calling out a troubled bank that everyone knows about is not an analysis of the entire industry. The opportunity is that the BAC wailing can surpress the stock price of good banks and those are worth looking at.

     

    Look to buy smaller banks with footprint in areas where the economy is strong.
    19 Nov 2011, 10:38 AM Reply Like
  • acesfull
    , contributor
    Comments (370) | Send Message
     
    This may come as a shocker, but I followed Bove's advice and bought BAC & C yesterday. Two reasons why I did it. First, the stocks are rediculously cheap. Second, there is no way this economy is going to recover without the banks. If the banks don't recover, neither will any other sector, and there will be no lasting recovery for any sector without the banks. So I dropped a few sheckles on some big banks. I expect to make a nice piece of change within a year. Anybody care to bet me on that?
    19 Nov 2011, 06:22 AM Reply Like
  • Joe Eifrid
    , contributor
    Comments (342) | Send Message
     
    I find BAC and C very cheap as well. I sold puts on them yesterday. From a contrarian point of view, and as evidenced by the comments here, it is hard to see how these two could be hated more. BAC, and I believe C too, are selling at less than half of TANGIBLE book.
    19 Nov 2011, 07:32 AM Reply Like
  • EMS
    , contributor
    Comments (582) | Send Message
     
    You have no idea what the meaning of "tangible book'' in this context. No one does. They are insolvent. Period. I guess you are betting on a round of QE and pump, but don't spew this crap about tangible value, it makes you sound just like Bove.
    19 Nov 2011, 09:11 AM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    The banking sector has always been the one to lift the markets out of recession and they probably will again, but until the EU settles it "bill" there is no way to tell what damage could be done to our banks, until then its better to just wait and see. There will be plenty of time to pick up bank shares once the worm has turned.
    19 Nov 2011, 06:49 AM Reply Like
  • EMS
    , contributor
    Comments (582) | Send Message
     
    Right on. I hope the rest come back to read your intelligent comment.
    19 Nov 2011, 09:12 AM Reply Like
  • Ron Myers
    , contributor
    Comments (256) | Send Message
     
    From the comments in this post and elsewhere it seems like the banks really are screaming buys with BAC and C at the top of the list. Almost everybody seems to think banks are going to zero. Even the slightest positive news in these stocks could start a monster rally.

     

    Even if you have the justifiable fear that you wake up one morning and find out BAC "actually holds 200 B in net euro sovereigns, sorry guyz" there are plenty of financials out there trading at well under ten times earnings and under TBV with fully marked balance sheets and no exposure to any of this crap.
    19 Nov 2011, 10:50 AM Reply Like
  • rgperrin
    , contributor
    Comments (933) | Send Message
     
    Right now, it's mostly guesswork, often combined with a variable measure of wishful thinking, and your guess is as good as mind. I'm still "in" on Bank of America, and I may win or lose. I can't forecast which. I do know that I have been on this ship before, in the 1980s, and, after nearly sinking, it finally reached safe waters, where it remained until a few years ago. I'm hoping for a similar voyage this time around. But that's all it is: hope, or what denizens of my state might better term a "gamble."
    19 Nov 2011, 11:05 AM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    While I'm still not a fan of banks, generally speaking, I have to agree with those that suggest there may well be some regional banks worth a look, as well as some Canadian and/or Aussie banks. However, I also think that if/when additional problems surface in the sector, all will suffer, to some degree, so averaging into a position would seem a prudent way to go.
    19 Nov 2011, 11:13 AM Reply Like
  • jazzman
    , contributor
    Comments (11) | Send Message
     
    Banks are generally worthless and BAC is the most worthless of them all..STAY AWAY because by Mid April next year the dollar is dead!!!
    19 Nov 2011, 11:49 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    jazz

     

    Care to throw any quantitative analysis out so we understand the logic behind your statements? Any analysis at all would be welcome.
    19 Nov 2011, 12:07 PM Reply Like
  • CBlack
    , contributor
    Comments (4) | Send Message
     
    The "flat earth" guys say: buy the banks.... your DONATIONS will be welcomed!
    19 Nov 2011, 11:57 AM Reply Like
  • CraigDutcher
    , contributor
    Comments (3) | Send Message
     
    Come on guyz, llet's be real - BAC is never going away. If that were ever to occur, the entire world economy would be in a total collapse. Be Bullish on BAC for the Christmas/January effect rise.
    19 Nov 2011, 01:22 PM Reply Like
  • ejhickey
    , contributor
    Comments (122) | Send Message
     
    Every time I read one Mr. Bove's recommendations he always includes a BAC rec. Yet the stock has gone nowhere in the las 18 months. I would like to be a believer but reality keeps getting in the way.
    19 Nov 2011, 04:22 PM Reply Like
  • Mack Wheaton
    , contributor
    Comments (173) | Send Message
     
    Fear can be a great reason to buy, its the simplistic argument for buying these stocks. For my money, sometimes the fear is not irrational. Better money makers out there for the next 12 months.
    19 Nov 2011, 05:12 PM Reply Like
  • Rhianni32
    , contributor
    Comments (2078) | Send Message
     
    I cant help but notice the quote is "I'd" as in I would and not I'm for I am. Its always easy to make calls with other people's money.
    20 Nov 2011, 08:38 PM Reply Like
  • Joe Eifrid
    , contributor
    Comments (342) | Send Message
     
    Because of his job, Bove is restricted from buying BAC stock due to regulatory requirements. Easy for me to say but, I'd not be buying too if I was in his shoes.
    21 Nov 2011, 07:37 AM Reply Like
  • clarkrobertf
    , contributor
    Comments (4) | Send Message
     
    When there is blood in the streets...
    21 Nov 2011, 12:15 AM Reply Like
  • Guru-Man
    , contributor
    Comments (3) | Send Message
     
    I have enough letters after my name to make alphabet soup! I have worked in Banking for over 25 years. Let me tell you how I see it. BAC is too big to fail. No matter what anyone tells you. Therefore it is just a question of whether the shareholder could still be wiped out before it goes into receivership. The government already answered that Question with Citi. Therefore for 5 or 6 bucks a share for BAC you are buying a government guaranteed lottery ticket provided you can wait the 3-5 years it will take to collect.
    23 Nov 2011, 10:52 AM Reply Like
  • Mack Wheaton
    , contributor
    Comments (173) | Send Message
     
    <Therefore it is just a question of whether the shareholder could still be wiped out before it goes into receivership.>

     

    Sounds a little risky to me. The industry despises government intervention until they screw things up. From this point forward, bank shareholders lose just like everyone else who takes risk in the market.

     

    I take your mention on of the alphabet soup as humility rather than hubris. Having spent a similar amount of time in a career in risk management, I have yet to see a discernible difference in the situational decision making of a good CEO and a good farmer.
    24 Nov 2011, 08:33 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs