NEW YORK (TheStreet) -- Using a balanced, integrated approach, TheStreet Ratings has produced a list of its five top-rated actively traded bank stocks.
Rather than keying in on particular attributes, such as price-to-forward-earnings ratios or composite targets among sell-side analysts, TheStreet Ratings uses a proprietary model that incorporates a stock's price performance and fundamental performance against its peer group, performance against the broad indexes, price volatility, earnings and capital growth, and financial stability.
A stock's composite rating is a trade-off, seeking the ideal combination of risk and reward. "While our approach incorporates a company's financial performance, we operate under the theory that many of a company's attributes are baked into its stock's price performance and volatility," said Kevin Baker, senior financial analyst for TheStreet Ratings.
Many ratings approaches fail to sufficiently consider risk. TheStreet Ratings places significant weight on a stock's volatility and downside risk.TheStreet Ratings has received several industry awards, including most recently Jaywalk's Independent Research Provider Performance Award, for the Best Bearish Stock Selection. You can access TheStreet Ratings data for any stock, ETF or mutual fund by clicking here. Each day, the Ratings group provides a summary of key upgrades and downgrades, and detailed reports are also available. The following are the five bank holding company stocks with the highest ratings, that also have three-month average trading volume of at least 50,000 shares. Price data is based on last Thursday's market close, since Friday was a market holiday. The market strongly favors these names, which all trade at forward price-to-earnings ratios of over 13, based on consensus 2012 earnings estimates among analysts polled by FactSet. In comparison, the best-known U.S. banking names trade at much lower price multiples, as investors shy away from multiple political and regulatory challenges, as well as the risk of losses from mortgage buybacks. For Bank of America (BAC) was cheapest among the "big four" U.S. bank holding companies by forward P/E, which was 7.2, based on Thursday's closing price of $12.31 and the 2012 consensus earnings estimate of $1.72 a share. JPMorgan Chase (JPM) was next, trading for 7.9 times the consensus 2012 earnings estimate of $5.66 a share, at Thursday's closing price of $44.68. Next was Wells Fargo (WFC), trading for 8.1 times the 2012 consensus EPS estimate of $3.51 at Thursday's closing price of $28.54. Among the big four, Citigroup (C) had the highest forward P/E of 8.6, based on Thursday's closing price of $4.55 and the consensus 2012 EPS estimate of $3.51. Interestingly, out of all five of the ratings group's picks, only one has a "sell" recommendation from any sell-side analyst. None of the 10 picks owe bailout funds to the government. The group also leans toward stocks with decent dividend payouts, as have the names have forward dividend yields exceeding 3.00%.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV