Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.

 

 

 

 

Macy's Boosts Dividend, Share-Repurchase Plan
 
Originally published at 11:08 a.m. EST on February 26, 2016
 
 

Macy's  (M) is increasing its share-repurchase authorization by $1.5 billion to a total of $2 billion.

The retail giant also intends to boost its July dividend by 5%.

Position: Long M
 
 

 
Taking Off a Small Amount of My Financial Longs
 
Originally published at 12:58 PM EST on February 26, 2016
 
 
"I expect recent pressures on net interest margins (i.e. lower rates and a flattening yield curve) to continue this year. I also believe that analysts' current earnings estimates are vulnerable in the next two quarters.

However, more-aggressive cost cutting should partially offset this. We've already seen some money-center banks announce some downsizings, and we should see more of this in the near future.

Overall, I remain of the view that bank stocks' appeal lies in the intermediate term -- measured in years, not months -- and that the stocks aren't a short-term trade.

But given current valuations, I'm inclined to look beyond the sector's 2016 profitability challenges. And if my recession fears don't come true, banks could be among the market's best-performing sectors in 2016-18."

-- Doug's Daily Diary, My Outlook for the Market's Major Sectors (Feb. 23, 2016)

I'm growing more bearish over the near term, and I'm slightly reducing my large exposure to bank stocks given the sector's 10% rally this week.

This in no way diminishes what I see as banks' intermediate-term appeal, but is merely a recommendation for those who are trading bank stocks rather than investing in them.

Banks as the group have rallied smartly from their recent lows, so I believe taking off some of those positions makes sense now for traders. Consider:

  • Bank of America  (BAC) has risen to around $12.90 from $11.65 two days ago.
  • Citigroup  (C) fell as low as $36.61 on Wednesday, but is now at about $39.80.
  • JPMorgan Chase  (JPM) traded at $54.33 two days ago, but is currently selling for around $57.90.

As I noted in the column quoted above, I know analysts will cut the industry's earnings forecasts somewhat in the weeks ahead to reflect lower interest rates, a flattening yield curve and increases in loan-loss provisions.

So, I'm taking off some bank-stock longs now, even though I believe they continue to represent substantial longer-term values. I still have eight bank stocks on my "Best Long Ideas" list, and that's not counting the Blackstone Group  (BX) , Goldman Sachs  (GS) and Morgan Stanley  (MS) .

Position: Long JPM, FITB, WFC, CMA, RF, BBT, SONA, BX, MS, GS, BAC (large), C (large)

At the time of publication, Kass and/or his funds were long M, Long JPM, FITB, WFC, CMA, RF, BBT, SONA, BX, MS, GS, BAC (large), and C (large), although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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