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Here is a list banking companies expected to benefit from the upcoming financial deregulation bills in Congress. These companies are included in an article in the October 25, 1999 issue of Barrons.
Our old ex-partner in crime at Barron's, Jim Grant, incidentally, caught the move in insurance stocks beautifully in the latest issue of his stylish and informative fortnightly, Grant's Interest Rate Observer. Not that Jim had any inside dope from Washington (savvy fellow that he is, he avoids all dopes from Washington, and especially the inside ones). But in his diligent search for undervalued securities, he turned up a list of 10 depressed insurance stocks, including the likes of Chubb, Ohio Casualty and CNA, a number of which ran up sharply in Friday's party atmosphere.
One of the stocks that Jim nudged his readers to consider is Safeco, which, a quick check reveals, is Archie MacAllaster's favorite insurance stock. Archie, a certified Barron's Roundtable participant, is also our favorite insurance-stock maven. Archie thinks the company is the class act in its group and that, its stock selling as it does way below book value, is dirt cheap.
Archie is chairman of MacAllaster Pitfield MacKay, a brokerage outfit that specializes in over-the-counter stocks, with particular emphasis on banks and insurance companies. The firm is a family affair, and its president is David MacAllaster, Archie's son. David, who in his time also has sat still for one of this magazine's famous Q&As, is a whiz on banks. So we decided to get our quarter's worth on Friday and chat with David, as well as his old man.
After dutifully commiserating with him over the sad denouement of the Mets, we foxily coaxed out of him some attractive bank names. We want to reassure you: David's better at picking winners in the stock market than on the diamond.
Generous to a fault, David gave us four stocks when we asked for only three. The quartet includes National City Corp., of Cleveland; KeyCorp, of the same town; Bank One, headquartered in Chicago; and North Fork Bancorp, on Long Island, in the great state of New York.
Both National City and Key, David reckons, are takeover possibilities, but good values in any case. National City boasts a terrific Midwestern franchise, pristine assets, a 4% yield, will earn $2.30 a share this year, $2.50 next, and the stock is down 30% from its high.
Key also pays a nice dividend (4.3% yield). And its earnings, too, David notes, are on the rise, to something like $2.45 in '99, $2.65 in 2000.
Bank One has gotten real beat up. As David drily observes, its woes in credit cards are "well-documented." But its unloved status and bruised stock-selling a hair over 34, down from a yearly high of over 63-are what make it appealing. He thinks the bank has seen its worst days and earnings should move up to $4 next year from $3.60 this year. While you're waiting, you get a not-too-shabby 5.1% yield.
North Fork, David contends, is the most efficient bank in the U.S. Its return on assets exceeds 2%, its return on equity, a formidable 25%. It's a canny acquirer, adding to earnings in the process. This year, it should net $1.60 and boost that to $1.85 in 2000. The shares are 30% below their best.
If these picks work out, call us. If they don't, call David. |
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