A report yesterday from KBW Inc. noted that among the best potential stocks of 2010 are JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp. (NYSE:BAC) and U.S. Bancorp (NYSE: USB), based upon the fact that their capital raising is almost completed.
In a note the analysts at KBW stated, “We are more positive on the large-cap group now that it is through the bulk of capital raising and the group is approximately 53 percent through our cumulative loss estimates. We view the current environment as an opportunity to trade up in quality.”
The three banks mentioned above were noted for their being positioned to generate earnings quicker than their competitors, although BB&T Corp. was also singled out as having significant upside potential as well in the near term by the analysts.
It is also thought the recent acquisitions by the banks will bring some immediate benefits, making them a solid bet for 2010.
One particularly interesting suggestion in the report was for investors to acquire warrants in the banks which had received TARP funds, as they have surged in price by in just the last month, with Capital One Financial Corp. enjoying a 23 percent increase, and JPMorgan warrants producing a 27 percent return for investors during that short period of time, making it highly likely other bank warrants will also perform strongly in contrast to their auction prices.
Talking about the largest banks, KBW bank analysts identified JPMorgan as “best in class,” noting they are probably going to increase their dividend sometime in the early part of 2010, which now stands a 5 cents a share. The company has also lowered its loan loss risk by setting aside enough capital to cover close to 70 percent of what they expect to lose over the coming year.
Advice given by KBW analysts for big banks was for investors to be “overweight” in them for the coming year. Life insurance and credit card network companies were also identified as sectors to be overweight in.
