The 'Too Big to Fail' Banks Remain Buy Rated Post-Earnings

NEW YORK (TheStreet)-- In the second half of January there was a wave of Q4 earnings results from the banks in the PHLX KBW Banking Index (BKX.X), and 12 of the 17 I profiled on Jan. 10in Buy-Rated Big-Bank Stocks to Trade Pre-Earnings beat their EPS estimates.

Among the four that missed expectations, two were among the six that were downgraded according to www.ValuEngine.com. Two of the downgrades were to buy from strong buy, while the other four were downgrades to hold from buy. Today I update my buy-and-trade profiles for the stocks I selected from the BKX.

The daily chart for BKX ($54.90) is overbought with the 21-day, 50-day and 200-day simple moving averages at $53.73, $51.63 and $48.22. The BKX traded to a new 52-week high at $55.06 on Tuesday vs. its Feb. 15, 2011 high at $55.88, and its April 2010 high at $58.81. My semiannual and annual value levels lag at $47.58 and $45.62 with a monthly pivot at $54.85, which was tested on Tuesday. This week's risky level is $56.25.

Chart Courtesy of Thomson/Reuters

The finance sector is 16.7% overvalued this morning with the banks-major regional industry just 1.1% overvalued. The "too big to fail" banks are in the major regional industry, and they continue to be among the best buy-and-trade stocks. On Jan. 10 we showed 11 of the 17 BKX stocks undervalued and today this number is down to 7. While 16 of 17 show double-digit gains of 16.3% to 52.3% over the last 12 months, the projected gains for the next 12 months is down to 3.9% to 9.6%. The 12 month s trailing price-to-earnings ratios are reasonable; three are single-digit and only one exceeds 20.0.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

On Jan. 4 I wrote 10 Themes for the New Millennium Teen Years and the third theme is that, "the upside for money center and regional banks will be limited in 2013. So far the BKX is up 3.1% in 2013.

Today I profile eight of the BKX that continue to be buy-and-trade candidates:

Bank of America ( BAC) ($11.88 vs. $11.43 on Jan. 10): Has been downgraded to buy from strong buy since Jan. 10 with the stock below its 52-week high set at $12.20 on Jan. 7. The weekly chart is overbought with the five-week modified moving average at $11.35 and the 200-week simple moving average at $11.71. My semiannual value level lags at $9.01 with a monthly pivot at $11.71 and weekly risky level at $12.29.

BB&T ( BBT) ($31.02 vs. $30.04 on Jan. 10): Has been downgraded to hold from buy rating and remains well below its multi-year high at $34.37 set Sept. 14. The weekly chart is positive with the five-week MMA at $30.39 and the 200-week SMA at $27.10. My semiannual value level is $26.10 with a quarterly pivot at $30.43 and weekly risky level at $31.86.

Citigroup ( C) ($42.92 vs. $42.04 on Jan. 10): Citi still has a buy rating with its 52-week high at $43.34 set on Jan. 25. The weekly chart profile is overbought with the five-week MMA at $41.22 and the 200-week SMA at $37.03. My annual value level is $33.19 with a monthly pivot at $43.00 and weekly risky level at $44.91.

Capital One Financial ( COF) ($57.13 vs. $62.31 on Jan. 10): Capital One has been downgraded to hold from buy and is well below its 52-week high at $62.92 set Jan. 7. The weekly chart profile stays negative on a close this week below its five-week MMA at $57.81 with the 200-week SMA at $44.71. My annual value level is $51.52 with a semiannual risky level at $58.68.

JP Morgan Chase ( JPM) ($48.79 vs. $45.47 on Jan. 10): JPM still has a buy rating and set a new multi-year high at $48.80 on Tuesday. The weekly chart profile is overbought with the five-week MMA at $46.03 and the 200-week SMA at $39.83. The October 2008 high is $50.63 with the May 2007 high at $53.25. My annual value level is $44.04 with a semiannual pivot at $46.84, and monthly risky level at $49.11.

Regions Financial ( RF) ($7.93 vs. $7.30 on Jan. 10): Regions has been downgraded to buy from strong buy and set a new 52-week high at $7.97 on Tuesday. The weekly chart profile is positive with the five-week MMA at $7.47 and the 200-week SMA at $6.20. My quarterly value level is $5.42 with a monthly pivot at $7.88 and weekly risky level at $8.13.

SunTrust Banks ( STI) ($28.76 vs. $28.71 on Jan. 10): STI still has a buy rating and remains below its Sept. 14 high at $30.79. The weekly chart profile is positive with the five-week MMA at $28.60 with the 200-week SMA at $23.89. My annual value lags at $21.60 with weekly risky level at $30.06.

US Bancorp ( USB) ($33.13 vs. $33.27 on Jan. 10): USB still has a buy rating with the stock below its Oct. 5 multi-year high at $35.46. The weekly chart profile is positive with the five-week MMA at $32.96. My quarterly value level is $31.82 with a weekly risky level at $33.56.

Wells Fargo ( WFC) ($34.85 vs. $34.71 on Jan. 10): WFC still has a buy rating with the stock below its Sept. 14 high at $36.60. The weekly chart profile is positive with the five-week MMA at $34.64. My annual value level is $32.82 with an annual pivot at $34.17 and monthly risky level at $36.03.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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