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Trading the 24 Hold-Rated Banks in the Regional Bank Index

 

NEW YORK (TheStreet) -- All 24 components of the KBW Bank Index begin 2014 with hold ratings according to www.ValuEngine.com. Of these, 17 had buy or strong buy ratings as 2013 kicked off its bull run.

Among the former strong buy-rated banks is the "too big to fail" Bank of America (BAC), which began 2014 with a new multi-year high after gaining 34.1% in 2013. My monthly risky level for January is $16.57. Capital One (COF) also began 2014 with a new multi-year high vs. its January risky level at $79.90.

The other three of the big four had buy ratings a year ago: Citigroup (C) gained 31.7% in 2013, JPMorgan (JPM) gained 33% and Wells Fargo (WFC) gained 32.8%. With hold ratings now, bank stocks will be lucky to pick up another 5% or more in 2014. JP Morgan set a multi-year on New Years Eve with its January risky level at $60.11.

The finance sector ended 2013 overvalued by 26.5% with an overall gain of 17%. The "too big to fail" banks thus outperformed the sector. The finance sector also had the lowest price-to-earnings ratio among all 16 sectors at 18.1%. With 84% of the 2967 stocks in this sector having hold ratings the sector gets an equal-weight rating. Hold-rated bank stocks can still be traded using my buy-and-trade profiles.

In addition to providing the gains for 2013, this table provides the closes and performances since Oct. 9 when I last presented this table on Oct. 10 in Four 'Too Big to Fail' Regional Banks Are Above 200-day SMA. Today, all 24 are above their 200-day simple moving averages, which means that bank stocks are subject to a reversion to the mean, which is my theme for the major equity averages presented in Stocks Begin 2014 With Inflating Bubbles and posted on Jan. 2, 2014.

Four regional banks had gains above 50% in 2013 including Comerica (CMA) up 56.7%, Huntington Banc (HBAN) up 51%, Keycorp (KEY) up 59.4% and State Street (STT) up 56.1%. Comerica and Huntington Banc were the two best performers since Oct. 9 with gains of 22.1% and 18.8% respectively.

The table shows that all 24 banks are overvalued as part of the universe of 86.4% of all stocks that are overvalued as 2014 begins. We show that 20 of 24 are overvalued by more than 20%, which is 83.3% of the index components vs. 61.2% of all stocks overvalued by 20% or more.

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