- Goldman Sachs (NYSE:GS): A solid risk-weighted capital allocation and global markets growth could be pivotal moving forward.
- Bank of America (NYSE:BAC): There seems to be a shift in the bank’s interest-bearing activities’ luck.
- Customers Bancorp (NYSE:CUBI): CUBI is a sharp action stock and a conviction play. It’s also the most impressively valued on the list.
Bank stocks have reached an inflection point. The industry’s poor year-to-date performance is down to stagnating trading income and slower than anticipated interest rate increases. I may sound crazy, but I believe that bank stocks could be the way to go for the rest of the year. My central argument is that the market’s already priced the industry’s near-term shortfalls and that high-quality stocks almost always revert to a linear growth trajectory.
The U.S.’ 8.5% inflation rate has ruffled some feathers, which could result in steep interest rate hikes, in turn providing strength to the debt market. Furthermore, trading and brokerage activities could stabilize soon as the global equity market finds calm after a series of headwinds.
|GS||The Goldman Sachs Group, Inc.||$317.75|
|BAC||Bank of America Corporation||$36.71|
|CUBI||Customers Bancorp, Inc.||$42.67|
Bank Stocks to Buy: Goldman Sachs (GS)
Goldman Sachs’s (NYSE:GS) year-to-date drawdown of nearly 17% is quite staggering. I mean, this is a powerhouse with one of the most carefully articulated revenue streams I’ve seen. For instance, Goldman’s Common Equity Tier 1 Capital Ratio of 14.6% means its right-weighted financial strength is 2.4x more than required for a bank to prosper.
The banking giant recently strolled past its first-quarter earnings by $1.78 per share. Goldman illustrated its prowess in the consumer & wealth management space with a 21% year-over-year increase in revenue. GS also sported a 4% year-over-year gain in global market revenue, reiterating its solid sell-side capabilities.
The stock is undervalued relative to its normalized 5-year average. Its price-to-earnings ratio of 6.21x and PEG of 0.22x provides testimony.
Bank of America (BAC)
I covered BAC (NYSE:BAC) stock in one of my previous articles, titled “7 Biggest Bargain Stocks To Buy Before They Rebound.” Bank of America’s recent drawdown has left its stock trading at an Relative Strength Index (RSI) of 37.56, which is very low for a stock bound to an industry with positively skewed returns.
Bank of America stock is definitely aligned for a recovery. The firm’s CEO, Alastair Borthwick believes there’s tremendous strength ahead in Q2; Borthwick was recently quoted saying, “If loans grow and rates in the forward curve materialize, we would expect to see NII in Q2 increase by more than $650M over the Q1 level and then grow again significantly on a sequential basis in each of the following two quarters.”
The American banking stalwart delivered solid first-quarter results this week, beating its earnings estimate by six cents per share. Additionally, BAC stock is undervalued with its price-to-earnings ratio trading at at nearly 20% discount to its 5-year average and its projected diluted earnings-per-share growth of 20.82%.
Bank Stocks to Buy: Customers Bancorp (CUBI)
This is an investment option for those seeking sharp action. CUBI’s (NYSE:CUBI) Beta of 1.54 means that it’s more volatile than the broader U.S. stock market and its conviction on interest-bearing activities causes it to be a cyclical stock. Nonetheless, I’m bullish on the stock for the foreseeable future as I believe it exhibits all the qualities needed in the current market environment.
Customers Bancorp beat its fourth-quarter earnings estimate by five cents per share with its interest-bearing activities managing to persevere during a high-inflationary environment. The company’s set to release its fourth-quarter earnings results on the 27th of this month and the signs are that it might beat estimates again. I’m basing my claim on CUBI’s Beneish M-score of -2.21, which indicates that it’s been through a period of conservative accounting and that an aggressive earnings report is due anytime soon.
The stock looks good at a price-to-earnings ratio of 4.21x and a price to sales of 1.88x. I’m bullish on this one!
On the date of publication, Steve Booyens held long positions in GS, BAC and CUBI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.