So the Dow is off from its high of about 18,000 and is currently trading at about 16,200. The U.S. Dollar is quite high. China is combusting. Interest rates remain very low with no sight of inflation. Oh, and oil is trading around $30 with no end in sight.
Where should one invest?
In U.S. Financial's of course. When the Dow was at 18,000 the U.S. Financial's were cheap. Now they are even cheaper. Why are they so cheap? 1. Recovering from 2008 sentiment, 2. Low interest rates, 3. Low Oil/commodity pricing affecting loans.
The U.S. Financial's have reported earnings results and they are very good. Even those exposed to energy are reporting good numbers. In addition, most banks are securely capitalized.
So which Financial's should be looked at for the long term? I've already written articles on numerous community banks (ESSA, HITB, SMMF, PKBK, etc) and regional banks (FNFG, CMA, etc) which I've liked over the past 12-18 months.
Given current valuations I like $FITB and $UMPQ for long term bargain hunters.
Fifth Third Bank
FITB is a regional bank out of Ohio that has over 1,300 branches, with about $105B in deposits and about $140B in assets. It operates in 12 States including Michigan, Ohio, Kentucky,Tennessee and Florida to name a few. It currently has a yield of 3.35%, and trades at about .84 of its book value with a P/E of 7.63.
FITB has low exposure to the energy sector. It's energy exposure is about 2% of its loans which equates to about $1.7B. FITB's current issue, if one was looking for an issue, is managing its expenses. It is dumping quite a bit into its technology which is usually a good thing.
From an earnings perspective, FITB has been seeing nice results from the sale of its Vantiv stake. Excluding the Vantiv proceeds, FITB's earnings, loans and deposits have been steadily increasing comparable to its peers.
UMPQ is a regional bank out of Oregon that has about 350 branches with about $17.5B in deposits and about $23B in assets. It operates in Washington, Oregon, Idaho, California and Nevada. It currently has a yield of 4.4%, and trades at about .83 of its book with a P/E of about 14.
UMPQ's best quality right now is its ZERO energy exposure. That's right,ZERO energy exposure. Also, UMPQ is benefiting nicely from increased revenues and earnings following its large purchase of Sterling Financial in 2013. UMPQ's main issue is that it is still feeling the effects of its purchase of Sterling in the form of converting over to one combined system which should be completed shortly.
In conclusion, there are a lot of values out there, many of which can be found in the U.S. Financial sector which are not affected by the strong U.S. Dollar and which will benefit from eventual higher interest rates. These are just 2 regional banks for long term bargain hunters to consider.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FITB, UMPQ over the next 72 hours.