Bove Sees Big Value, Potential Doublers in Bank Stocks

by Marc Bastow | August 15, 2013 12:01 pm

The financial crisis of 2008-09 that blasted bank stocks might not be completely in the rear-view mirror, but Rafferty Capital bank analyst Dick Bove certainly thinks the worst is over.

Bove believes investors should be buying financials “very aggressively”[1], and pointed out notable discounts in book value in five stocks:

And Bove likes BofA and Citigroup specifically to at least double … not necessarily in the next 12 to 18 months, but “it is going to happen,” he says.

No doubt about it: Bank stocks are back in favor as they continue recapitalizing balance sheets, taking advantage of ultra-low borrowing rates at the Fed window to increase margin spreads, and making the occasional — and usually very profitable — hedge bets on stock and bond positions.

The results have been record profits, increases (and even reinstatements) in dividends, and soaring stock prices. The broad-based Financial SPDR (XLF[7]) is up a screaming 37% in the past 52 weeks, led by individuals like Bank of America (+83%) and Citi (+77%). Not to mention the other two Big Four stocks — JPMorgan (JPM[8], +43%) and Wells Fargo (WFC[9], +27%) – are up strongly in that time, and both also increased their dividends[10] by double-digits during the year.

Bove believes the banking sector is headed for continued record profits through the remainder of the year as reduced loan-loss ratios and lower bad-debt write-offs boost earnings forward.

I admit to being a laggard when it comes to the sector, but perhaps a second look is worth the while — whether it’s for the growth predicted by Bove in BofA and Citi, or for the nearly 3% dividends in Wells Fargo and JPM.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

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Endnotes:
  1. should be buying financials “very aggressively”: http://finance.yahoo.com/news/dick-bove-two-banks-rally-154508684.html
  2. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C
  3. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  4. STI: http://studio-5.financialcontent.com/investplace/quote?Symbol=STI
  5. RF: http://studio-5.financialcontent.com/investplace/quote?Symbol=RF
  6. MS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MS
  7. XLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLF
  8. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  9. WFC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WFC
  10. increased their dividends: http://investorplace.com/2013/08/lloyds-dividend-lyg-jpm-wfc-payout-ratio/
  11. a lot of the banks: http://investorplace.com/2013/07/the-3-best-big-six-bank-stocks-to-buy/
  12. these 23 banking stocks: http://investorplace.com/2013/08/23-commercial-banking-stocks-to-buy-now-htbi-pnfp-tayc/
  13. smaller bank: http://investorplace.com/2013/07/these-small-banks-have-big-potential/

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