Welcome to round two of Evan’s Weekly Stocks To Watch! Now, before I get started, I just want to clarify something. I believe that these stocks are very solid options for the long term. Currently, with the coronavirus, the market is constantly fluctuating up and down as more news keeps coming out. Some of the stocks I share may be doomed to lose a lot more money before they begin to trend upwards again. That being said, if you choose to buy into the market right now the timing is entirely up to you. The only opinion I am providing is whether I like certain stocks. I am not saying whether I think it is best to buy in now or at any other time. With that being said, let’s dig into my week two picks!
This week is “Shark Week”. Sorry, my bad — I meant it’s bank week (but what’s the difference?). I’ll review my top three shark — I mean bank stock — picks.
Banks are a great long term buy, especially right now since their prices are so low from the pandemic. You may have heard that we are going into a recession as a result of the coronavirus, possibly more extreme than the 2008 Financial Crisis. While bank stocks are typically a bad option during a recession, especially in 2008, right now we are looking into the long-term. In 2008, banks were partially at fault for the financial crash. They had weak balance sheets, were in over their heads with risky loans, and were not prepared for the extreme loss of revenue.
Now, a decade later, banks have learned their lesson. They have huge cash shores on hand in case a big event, like the coronavirus, suddenly shocks the system and causes them to lose money. Bank stocks are down right now because the economy has ground to a halt and interest rates are near or at zero. These factors basically mean that banks are making significantly less money than they normally would, so as a result their stock prices have fallen.
Fortunately, this time around there is confidence that large banks will make it through the crisis virtually unscathed and prepared to pick up where they left off. Once economic activity rebounds, these banks are highly likely to return to their normal levels of profit. Oh, and banks will be pivotal in our economy’s recovery after covid, as governments will be using them as their middlemen. With that being said, here are my favorite bank stocks.
Bank of America
Bank of America (BAC) is extremely financially stable right now. It is the second-largest bank in the US and serves 66 million customers. With its current stock price 33% lower than it was heading into the pandemic, Bank of America is a steal right now when considering its future. Once economic activity returns to normal, BAC could easily make up that 33% gap. Beyond this, Bank of America has done well to expand into the mobile banking space and has been extremely innovative over the past few years compared to many of its competitors. BAC is set to keep growing once life returns to normal.
JP Morgan Chase
JP Morgan Chase (JPM), like BAC, is too big and well-run to fail during this crisis. Its price is also significantly lower than before coronavirus, providing a buying opportunity. JPM has one of the best management teams of any bank and holds more assets than any other. JP Morgan Chase’s revenues and profits have been increasing vastly over the past years, at a greater rate than its competitors. Once this major bump in the road has been passed, whether six months or a few years from now, we can expect JPM to continue growing and innovating.
Citigroup (C) has long been the most underwhelming of the big four banks in America. However, since the 2008 crisis, it has been improving its financials and almost has achieved numbers competitive with the other big three. C trades at the lowest price relative to its value and thus is the most undervalued of the large banks (because of its history of underperformance). The other two stocks above are certainly safer and more stable than Citigroup, but C provides the cheapest price of any of the big banks and offers the highest potential gains.
While our writers talk about these stocks, we are in no way giving the reader investment advice or urging them to buy any stocks. The goal of this series is merely to provide an opinion on certain stocks; what our readers choose to do with this opinion is entirely up to them. This is not meant in any way to be investment advice.