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1/ No surprise here, $JPM carried the day though I am a bit surprised at the magnitude of its win. I think $BAC is comparable in quality and I know some value investors are bullish on $WFC at these prices.
Let's take a closer look at these companies using @ycharts. https://twitter.com/Matt_Cochrane7/status/1280843992247218176
Let's take a closer look at these companies using @ycharts. https://twitter.com/Matt_Cochrane7/status/1280843992247218176
2/ The performance of these banks is pretty damning. Over past 5 yrs, none have beaten the S&P 500, and only $BAC and $JPM are +tive. TBF, $BAC and $JPM were comfortably ahead of market until COVID19 hit, but that's 1 of the reasons I sold $JPM recently - too many macro risks.
3/ Besides macro concerns, large banks are slow growing. None of them besides $JPM have grown revenue in meaningful way over past 5 yrs.
4/ They have repurchased shares and grown more efficient though, finding ways (except $WFC) to grow EPS.
5/ Outstanding share count have steadily come down while dividends have increased.
6/ What about valuations? By P/E ratio they are cheap, though it is important to compare banks to their peer group and not the "market" at large. Still the valuations look like a good deal of risk and sustained low interest rates are priced in.
7/ By P/B ratio, one of the most important metrics for banks, $JPM is the only one of the four that is over 1.0. $C and $WFC are only 0.6.
8/ So much goes into investing in banks b/c of their complex business models and assets under management. I exited $JPM recently, a multiyear holding, b/c it was too hard to follow with too many unknown/hard-to-follow liabilities and macro concerns.
9/ That being said, there might be value in this sector, it's just not for me.
As always, this only represents a first look at these financial institutions and much more due diligence would be required before making a responsible investment.
As always, this only represents a first look at these financial institutions and much more due diligence would be required before making a responsible investment.
