Four Financial Stocks That Are Trading Below Book Value

I know that things are looking tough in the financial sector but some of these stocks are simply too cheap to pass on. There are a number of financial companies whose stock prices are so low that there is limited downside risk. You can buy some of these companies at prices that would have been unthinkable prior to 2008. Here are a few financial stocks that I think are worth taking a flyer on.

Morgan Stanley (MS) has dipped into the $15 range and its shares are trading for one half of their book value. The bank is well capitalized and has the assets to weather any financial storms ahead. This past quarter Morgan Stanley saw strong growth in its investment banking operations. The bank has been making the right moves to remove the risk from its balance sheet. 2012 is key for Morgan Stanley as the bank is expected to see earnings more than double next year. The bank trades at an incredibly low 6 times next year’s earnings estimate.

Bank of America (BAC) has a ton of lawsuits and regulatory issues to deal with. Things look incredibly bleak at the bank as investors are afraid of the next shoe to drop. BofA is doing everything possible to cut costs including laying off by higher level and lower level employees. The bank is also reducing its size by closing 10% of its branches and plans to cut more jobs over the next 6 months. Bank of America is closely tied to the health of the economy. The bank still has risk with it until the economy recovers but a $7 a share the bank is a bargain.

KeyCorp (KEY) is the midsized bank that very few people talk about. The bank is currently selling for just $6 a share despite having a solid banking business that is growing. KeyCorp trades at just 7 times this year’s earnings. The regional bank is trading at just 0.6 times it book value. KeyCorp is a decent dividend play for investors looking for cash from a financial stock. The bank has a 12 cent dividend and is currently yielding 2%.

SunTrust Bank (STI) has managed to weather the financial storm nicely and the bank is trading at a level that should be attractive to value investors. Shares of SunTrust are holding just above $19 as the stock almost trades at one half of book value. The financial institution trades at 9 times next year’s earnings estimate. SunTrust recently boosted its dividend 400% to 20 cents per share and now has a yield of 1.1%. How many banks have you seen increasing their dividend after last quarters earnings announcements?

6 Responses to “Four Financial Stocks That Are Trading Below Book Value”

  1. avatar Market Maker says:

    BAC is an interesting one. It’ll probably be back up to $16 in no time.

  2. avatar Buck Inspire says:

    All four look interesting. Might have to take a closer look!

  3. avatar Chris Ward says:

    On a fundamental basis these stocks are certainly trading below tangible book value… (BAC is a bit of a conundrum with the unknown liability of the lawsuits regarding the mortgage exposure but even worst case scenario 70 billion, the bank would be ok although the stock price would head lower on that big time.

    However, I would characterize trying to buy these stocks right now as trying to catch a falling knife… particularly with what is going on in Europe. Even though all of the CEO’s and analysts alike have claimed that these money centers have minimal exposure to their European counterparts, it will not matter if we get a meltdown over there. We may not own al ot of Europe’s sovereign debt (these banks) but these money centers do trade with them presenting counter party risk and contagion concerns (perceptions).

    And its all about perception — buyers vs sellers. Be very careful with these right now… And we are not by any means at the sentiment extremes we saw at the low in 2009, in other words I do not see the kind of end of the world attitudes we had when the Dow hit 6500.

    Check out on Catching falling Knives.

    Chris

  4. I have avoided any kind of financial stock for 5 years. I have to disagree that they are “simply too cheap to pass on”. They are too risky to put in anything but the most speculative portfolio unless you get a deal like Buffett did. Notice he didn’t buy the common stock! They sell below book value because of LOTS of problems and potential risks. Now is not the time to speculate but the time to look for QUALITY DIVIDENT GROWTH stocks!

  5. avatar Eric says:

    Those are all interesting companies, but it is important to note how quickly book value per share can swing at a financial company. It is important to take a deep dive analysis to ensure that their asset portfolio is solid and will not tank if the economy makes a sudden change.

    I have always been a fan of Morgan Stanley. I also like the conservatively run regional banks, like Sun, if they have a strong balance sheet.

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