The failure of Silicon Valley Bank (SVB), the second biggest failure in U.S. bank history, clearly has left a nasty taste in the mouth of hedge funds and institutional investors. In fact, net exposure to financials across Wall Street sat just off the lowest levels in decades before Friday, and net exposure to banks is also effectively at the lowest level since 2010. In addition, short sellers laid the wood to financials in March to the tune of $10 billion, and financial short interest as a percentage of market capitalization is at the highest among all the sectors at a stunning 2.2%. The Wall Street axiom about buying when there is blood in the streets may be in play here after some big money center banks posted strong numbers on Friday.
While regional and smaller banks may still come with a degree of risk, as they could face the same liquidity issues SVB did, the mega-cap leaders that pay solid and dependable dividends make sense for investors with a long-term horizon. We found six stocks that are rated Buy and look like great ideas for a strong bounce higher. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bank of America
This is one of the biggest in the country, and Buffett owns a stunning 1.1 billion of its shares. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
Bank of America has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
The bank is expected to post first-quarter results on April 18, and if it follows the lead of the banks that reported last Friday, it should do very well.
Shareholders receive a 2.98% dividend. Oppenheimer has a $44 target price on Bank of America stock. The consensus target is lower at $40.43, and the shares closed on Friday at $29.52.
BlackRock
While not a money center bank, this may be one of the best investments in the financial world. BlackRock Inc. (NYSE: BLK) is a publicly owned investment manager and the world’s largest asset manager. The firm primarily provides its services to institutional, intermediary and individual investors, including corporate, public, union and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions and banks. It also provides global risk management and advisory services.
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