It’s easy to overlook things… especially if you’re not really looking for them. It’s the approach most investors have had with financial stocks. Since the crisis of 2008, the financial services business has changed radically. The “too big to fail” firms — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and the like — have enjoyed stock price rebounds but still suffer from constant regulatory scrutiny and risk. #-ad_banner-#Their earnings multiples are temptingly low, but for good reason: uncertainty. It’s really hard to figure out how these firms make money and how… Read More
It’s easy to overlook things… especially if you’re not really looking for them. It’s the approach most investors have had with financial stocks. Since the crisis of 2008, the financial services business has changed radically. The “too big to fail” firms — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and the like — have enjoyed stock price rebounds but still suffer from constant regulatory scrutiny and risk. #-ad_banner-#Their earnings multiples are temptingly low, but for good reason: uncertainty. It’s really hard to figure out how these firms make money and how much they’re going to make going forward. So the market, which gets it right every now and then, doesn’t have a whole lot of confidence in their ability. It’s even worse for super regional and regional banks. Traditionally, they’ve had to lend money to make money. Since 2008, despite the Federal Reserve’s best efforts to encourage them to do so, they just won’t lend money. Most of their revenue is derived from existing business and “feeing” their current customers to death. That’s a poor business model that no one should invest in. So once past mega-cap financials and regional banks,… Read More