This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

5 Large-Cap Bank Stock Buys From Guggenheim

Stocks in this article: BAC WFC RF USB BK

NEW YORK ( TheStreet) -- With so many bank stocks showing very strong year-to-date returns, even aggressive bank stock investors may be tempted to pause and take some gains.

Guggenheim Securities analyst Marty Mosby covers large-cap banks, and shared his five top picks with TheStreet, including three "quality banks" and two "that are still in recovery mode," providing an opportunity for investors, because of discounted valuations to tangible book value and to forward earnings estimates.

Here are Mosby's five top picks, ordered by ascending upside potential, based on Monday's closing prices and the analyst's 12-month price targets:

5. Wells Fargo

Shares of Wells Fargo (WFC - Get Report) closed at $33.50 Monday, returning 23% year-to-date, following a 10% decline during 2011. Based on a quarterly payout of 22 cents, the shares have a dividend yield of 2.63%.

The shares trade for just over twice their tangible book value, accordion to Thomson Reuters Bank Insight, and for nine times the consensus 2013 earnings estimate of $3.68 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $3.28.

According to data supplied by Thomson Reuters Bank Insight, Wells Fargo's quarterly operating returns on average assets have ranged from 1.21% to 1.30% over the past five quarters, putting it near the top for consistent, strong earnings performance among the largest U.S. bank holding companies.

Mosby says that with the completion of Wells Fargo's integration process for Wachovia -- which Wells Fargo acquired at the end of 2008, thus doubling in size -- the company will "take advantage" of the development of their franchise, "as well as the integration expenses going away in the second quarter."

Mosby said in April that "WFC's plan to remove $1.5 billion in quarterly operating expenses throughout 2012 is expected to begin to impact earnings in the second quarter of this year, generating an acceleration in sequential earnings per share growth next quarter," adding that although "one of the biggest concerns about WFC, in our view, has been whether revenues would grow in 2012," the company during the second quarter "increased revenues sequentially by $1 billion, as fee income sources rebounded."

Please see TheStreet's earnings coverage for details on Wells Fargo's second-quarter results.

Mosby's price target for Wells Fargo is $43, and he estimates the company will earn $3.43 a share this year, followed by EPS of $3.84 during 2013. The analyst said that "Over time, if management can replicate the prior era of consistent earnings per share growth, we expect WFC to produce 13% to 18% in annualized total shareholder returns."

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs