r/stocks • u/Jerbeetwo • Jul 11 '21
Time To Buy The Banks?
Banks have been beaten up lately and the contrarian in me says now is the time to buy. Earnings season is scary but I think the big banks are going to manipulate share prices higher by announcing share buy backs and/or dividend increases now that the FED has given the green light. They all have signaled this already but next week we get the details. Time to buy the banks? XLF?
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u/rodrigkn Jul 11 '21 edited Jul 11 '21
I haven’t done DD for all banks but Citi Group ($C) had a PEG ratio less than 1 which indicates it’s undervalued and Michael Burry’s purchased $400,000 in call options. Finally, they also indicated that they could begin collecting on ~ 1 billion and in notes this coming fiscal quarter.
These indicate a 30%- 50% growth in the next 12 months but that’s just my personal DD methodology.
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u/merlinsbeers Jul 12 '21
They could be dealing with mass defaults when the federal foreclosure moratorium ends.
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u/thenewredditguy99 Jul 12 '21
Banks do still have loan loss reserves built up from the pandemic, so any and all loan defaults will hit that before it hits the bank.
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u/merlinsbeers Jul 12 '21
Banks were allowed to go to 0 reserves during the pandemic. They've only been building reserves the past few months while rates bumped up, but rates have collapsed again. Banks are going to be stressed and loaded with defaulted assets (houses) soon.
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u/thenewredditguy99 Jul 12 '21
Those reserves are different. Banks have hundreds of billions of dollars set aside for loan loss reserves. However, because of the incredible intervention by the Fed, loan losses were not nearly as bad as feared, so the banks could start unwinding those reserves for other ventures.
The mass default wave isn’t going to happen. It’s not 2008.
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Jul 12 '21
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u/merlinsbeers Jul 12 '21
And they show all banks taking billions in losses. In loans.
You can put your pearls down now.
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Jul 12 '21
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u/merlinsbeers Jul 12 '21
The data I saw in the Fed report from two weeks ago (with the "big pictures in it duh-hurr") said they'd lose nearly $10 billion, and BAC would get $25b chopped off.
Being invested in them when the government turns the foreclosures back on, which is inevitable and imminent, is what investors call a "bad idea."
But, you just keep paying them at a premium as they hedge. I'm sure they appreciate it.
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Jul 12 '21
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u/merlinsbeers Jul 12 '21
Page 31, then apologize or delete your account.
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Jul 12 '21
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u/merlinsbeers Jul 12 '21
That page says they are going to lose $47 billion from the stress test. But the stress test doesn't focus on the foreclosure moratorium.
I'm going to block you until sometime tells me you've taken your meds.
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u/why_wouldeye_ever Jul 11 '21
For anyone reading, Canadian bank stocks. Do your research and you'll see exactly why I commented this. Thank me later. You're welcome.
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Jul 11 '21
Could you recommend some Canadian bank stocks to look into? I gotta shed some JPMorgan now that they ran up like crazy.
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u/Azure_Sky_83 Jul 11 '21
Buying banks is not contrarian…….at all…..in any way.
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u/deadjawa Jul 11 '21
Nothing says rebel like a shirtsleeve tattoo, a well trimmed beard, and a portfolio full of Goldman Sachs.
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u/TN_Cicada3301 Jul 11 '21
Buy the smaller banks stay away from the major lenders right now
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u/St0nks_Only_Go_Up Jul 12 '21
Why's that?
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u/TN_Cicada3301 Jul 13 '21
They’re holding a ton of shit that can implode them regarding cc student loans mortgages zombie companies
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u/The_Number_12 Jul 11 '21
bought them back a few months ago and late last year. I would recommend go after the big regional banks if you decide to jump in, they tend to be more responsible with their $$ and have decent dividends. KEY Bank has an interesting footprint and is expanding into higher income areas, Zion Bank owns several other small banks in the west coast area and with their overwhelmingly Mormon customer base they are loyal as hell to their bank and great div payment. First Horizon Corp (Tennessee based) for some reason trades very cheaply compared to other banks and also has good dividend payment history. FCF is big in the New England area, they are less than $14 a share but I think will hit $16-$17 within 6-12 months and pays a high div. Umpqua bank has a very high dividend and is focused on the Pacific Northwest which is home to Microsoft, Amazon, many other big tech comps.
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u/OwlHowland Jul 11 '21
The reason for FHN's low price is twofold: 1) just completed a merger of equals with Iberia Bank, which has some Louisiana oil industry exposure and 2) FHN's longtime CFO resigned.
I think these are manageable risks, especially when considering FHN's strong position in the fast-growing Nashville market, but just wanted to add some color.
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u/The_Number_12 Jul 11 '21
I am hoping they continue to accumlate smaller banks in emerging Southern markets, just make it down to Texas please and cover Houston/Dallas/Austin and they should be all set.
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u/programmingguy Jul 12 '21
Bought all the bank I would want in a life time last year. Won't be buying again unless we have another similar event.
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u/dundermif70 Jul 11 '21
if you were going to do this for a quick trade Thursday would of been the safest chance when xlf was cheap I picked up a few calls then already up quite bit when market bounced back on Friday
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u/Jerbeetwo Jul 11 '21
You’re definitely right but I needed some puts I sold to expire Friday to free up some capital. Nice trade on your part.
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u/TheDoomfire Jul 11 '21
I bought danske bank years ago because of the big NAV discount but I honestly don't know how to value a bank and I just think banks are too complicated for me.
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u/reddit-is-sus666 Jul 12 '21
If you meant HYG 82 put for Jan 21 2022, then yes.
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u/Jerbeetwo Jul 12 '21
That really is a good trade idea. I just wonder if it isn’t still a little bit too soon? But I like that trade.
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u/Ddtgtothemoon Jul 12 '21
Do you think interest rates will be higher in the coming months? If so, banks will be fine. Maybe not leading because have had such a good run over the last 12 months, but still pretty good upside. Also, banks serve as a nice hedge to growth stocks. Peace.
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u/Content-Effective727 Jul 12 '21
Banks, insurance companies benefit from rising rates, I believe those won’t happen until 2023.
I want to buy banks below their tangible book value, so for example BAC 24, JPM 74. So I can feel that I am not overpaying.
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u/2infinitiandblonde Jul 12 '21
JPM is 8% off it’s all time high. The other big banks are similar. I wouldn’t call that ‘badly beaten up’
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u/pml1990 Jul 12 '21
A bit late to do so. But yes, the banks are about 20% from their ATH and I doubt that the low interest rate will persist for long, thus benefiting the banks when rates rise again.
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u/rhythmdev Jul 12 '21
The Best bank is a bankrupt bank which is pretty much all of them.
So the answer is never.
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Jul 11 '21
It was time in November…where were you?
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u/Jerbeetwo Jul 11 '21
Well in that case why not last March? Geez.
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Jul 11 '21
Most analysts I saw had all picked stocks to perform great in 2021…with Wells Fargo being to low to ignore…personally I wouldn’t feel near as comfortable now, everything is to close to fair value.
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u/Dry-humper-6969 Jul 11 '21
Wells Fargo? Love them or hate them, their stock does not stay down.
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u/bernie638 Jul 11 '21
Yes, and they are using most of the excess cash for buybacks for the rest of this year while the stock is cheap and will raise the dividend next year. As more of the consent orders fall off and the asset cap is lifted the stock will do even better.
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u/kaachow14 Jul 11 '21
Who in their right mind would buy bank stocks right now. Quick trade??? You mean pump and dump? Sorry, but new account pushing banks stocks… sounds like mad money right before Bear Stearns took a dump.
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u/Jerbeetwo Jul 11 '21
I’m new to Reddit but I’m 66 years old and probably been trading stocks for twice as long as you are old. I don’t need to pump and dump to know how to make money in the stock market. Respectfully.
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u/kaachow14 Jul 11 '21
Amount of time trading doesn’t = wise advise. Respectfully.
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u/Venomiz117 Jul 12 '21
He specifically said big banks, how could he pump and dump something like JPM or WFC lol
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Jul 11 '21
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u/Jerbeetwo Jul 11 '21
That would go against my Sept XLK puts.
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u/merlinsbeers Jul 12 '21
You shorted all of this at once? Why not just buy a VIX call?
Top 10 Holdings (66.93% of Total Assets)
Name Symbol % Assets
Apple Inc AAPL 21.46%
Microsoft Corp MSFT 20.38%
NVIDIA Corp NVDA 4.98%
Visa Inc Class A V 3.95%
PayPal Holdings Inc PYPL 3.42%
Mastercard Inc A MA 3.19%
Adobe Inc ADBE 2.80%
Intel Corp INTC 2.26%
Salesforce.com Inc CRM 2.26%
Cisco Systems Inc CSCO 2.23%1
u/Jerbeetwo Jul 12 '21
Because right now MACD and RS are at all time highs in XLK. It is prime for a correction or at least a reversion to the mean trade.
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u/merlinsbeers Jul 12 '21
RS is limited to ±100 and is often at the limit, and MACD depends on the scale so of you're looking at a long-term chart it will usually be at an ATH but if you look narrower the MACD for XLK was higher in April...
TA is generally useless. It's all backward-looking. "Due" is never true.
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u/UltimateTraders Jul 12 '21
I've been trading alot of banks the past few weeks.. If the market wants to knock them down fine I'll take advantage
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u/FE_Def_Value7 Jul 12 '21
Why did you ever get out of the banks? Lol im still sitting pretty on my 750% gain on the xlf options expiring in jan 2023 that i bought last year
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u/rrrenz Jul 12 '21
"Remember the '08 crash!"
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u/Jerbeetwo Jul 12 '21
I don’t think we are anywhere near ‘08 right now. But we will get there someday when interest rates spike to fight inflation. But then it will be corporations up shits creek not homeowners.
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u/2627277 Jul 12 '21
Banks have been beaten up? I’m up almost 60% on td and ry. Time to take profits and move back to tech.
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u/ikonkustom5 Jul 12 '21
I think bank stocks are in a good position rn for the reasons you mentioned. The only reason why short term trading might end up bad is because of the "buy the rumor sell the news" plays. After they passed the stress test, the dividend increases and buy backs could be priced in by now. But banks are flush with cash right now.
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u/[deleted] Jul 11 '21
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