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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
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.
Bank of America (BAC - Get Report) 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 - Get Report) 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 - Get Report), 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 - Get Report) 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%.