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Strategies & Market Trends : BAK - Investing -- Ignore unavailable to you. Want to Upgrade?

To: batman10023 who wrote (359)	3/1/2012 8:38:31 PM
From: bankbuyer	1 Recommendation Respond to of 3249

" who feel like they can't analyze the companies balance sheet and so stay away Ya know- even my PRK a $6.5 billion conservative community bank did some legit but impossible to analyze until after the fact stuff. Going forward, my view is that you are buying management expertise/integrity first, economic cycle view second, and estimated multiple third. Some multiple expansion has already occurred- new money should go into names where the estimates are too low. Your a-b-c-d was very astute and fitting thought process to the sector.

To: batman10023 who wrote (359)	3/1/2012 8:44:15 PM
From: xxyy	Read Replies (2) \| Respond to of 3249

JPM is easy to like, though I still like both BAC and C better. JPM gives you a lot less heartburn. Their analyst day talks about $24Bn in earnings they want to hit eventually, and they suspect they will have record profits this year or the next. They are (or at least were, when below TBV) aggressively buying back shares. I think cash returned to shareholders (divs + buybacks) is in the 10% range this year. I guess a little less now that the stock has moved up. Some analyst said "you realize your stock would go up if you spent more on divs." Dimon's response - "exactly." He's got a good approach to buybacks. He's going to get as many as he can when the shares are cheap (I'm not sure what that qualifies as, though - below $40? below $50?). IMO a 10% ROE deserves about a P/E of 10, so if they do hit $24Bn of earnings, I'd expect it to rise a fair bit more. It's kind of funny that JPM probably earns every 2-3 weeks what Facebook earns in a year, but their market caps aren't going to be vastly different.

To: batman10023 who wrote (359)	3/1/2012 9:12:32 PM
From: Covenant	Read Replies (1) \| Respond to of 3249

*b) who feel like they can't analyze the companies balance sheet and so stay away* I'm sort of in the b category also. These companies produce 10Ks which have a couple hundred pages of disclosures, and after reading them I feel they haven't disclosed very much at all. There can be enormous risks which cannot be detected in the financial statements. Of course, all businesses have risks, many of which are undisclosed. It is the leverage which adds severity to the banks. Why I generally avoid banks is I think the market ignores much of the risk when pricing the stocks. Nothing levered 10:1 should trade above a single digit PE. There is another category: e) do not want the regulatory and legal risks of businesses explicitly being targeted by the government. YPF in Argentina is analogous to US TBTF banks in this regard.