Talking Stocks 2.0

[chadwick4eva]

Originally Posted by beshannon

I may be looking to add bank names today

Bank stocks drop after Archegos Capital collapses

https://seekingalpha.com/news/367708...ital-collapses

I am long MS and JPM

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

[beshannon]

Originally Posted by chadwick4eva

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

I am going to disagree in that Financials will do better in a rising rate environment which we are going to seeing in the next 2-5 years. The P/E of MS here 12 and the stock bounced off support today at ~76. A 12 month target of 86 give a forward P/E of only 16.

I am holding JPM here and not adding as I am fully into that position as a long term core holding. I added to MS this morning

[chadwick4eva]

Originally Posted by beshannon

I am going to disagree in that Financials will do better in a rising rate environment which we are going to seeing in the next 2-5 years. The P/E of MS here 12 and the stock bounced off support today at ~76. A 12 month target of 86 give a forward P/E of only 16.

I am holding JPM here and not adding as I am fully into that position as a long term core holding. I added to MS this morning

Fair point. Banks will likely excel in the interest rate environment it looks that we're moving towards.

@beshannon I've seen you reference your "core" positions in a few posts on here, I am wondering if you'd be willing to share these current holdings in the thread. I am a fan of the majority of companies you talk about personally investing in (good companies, products/services, well managed, sound fundamentals, etc.), and have added a few of these to my portfolio (including HD) along the way.

[beshannon]

Originally Posted by chadwick4eva

Fair point. Banks will likely excel in the interest rate environment it looks that we're moving towards.

@beshannon I've seen you reference your "core" positions in a few posts on here, I am wondering if you'd be willing to share these current holdings in the thread. I am a fan of the majority of companies you talk about personally investing in (good companies, products/services, well managed, sound fundamentals, etc.), and have added a few of these to my portfolio (including HD) along the way.

Long term core holdings for me are ABBV, AAPL, HD, INTC, JPM, MSFT and WM

I have a low cost basis in these and a very high yield on cost % for the dividend.

I may or may not add to or trim these on occasion like AAPL but I will always have a holding of at least my intial position. If I get a buying oportunity I may increase the position.

Everything else I mention is usually a trade with a short to medium duration time frame or price target goal.

[TradingLoss]

Originally Posted by chadwick4eva

I too am long JPM as well and think MS is one of the premiere large wealth management firms as well. Both solid choices in financials. However, I'm a bit concerned about where they are sitting at in terms of the p/b value relative to historic levels. Here are the p/b ratios over time for both:

https://www.macrotrends.net/stocks/c...ase/price-book

https://www.macrotrends.net/stocks/c...ley/price-book

In both of these cases the run on both stocks is a bit concerning. We are looking at a multidecade high in both names for the p/b ratio. Personally I feel that now is the time to trim in financials as much of the sector has run red hot so far this year. JPM is one of my best yielding stocks, however, and I don't really want to trim as I have multi decade time horizon.

The only subset of the financials I feel differently about is many insurers- I feel that a lot of the health insurers (UNH, ANTM, HUM), and property/casualty insurance companies (ALL, PGR, AFL, etc.) are actually reasonably priced based on historical trading levels. For the most part these companies also have good fundamental trends and strong histories of driving shareholder value with buybacks and dividends. While these companies have had a solid little run in the past few months, they have not experienced the same level of gains that a lot of the major bank stocks/ capital markets stocks have enjoyed. I made a post on it a while ago but from a Free Cash Flow perspective many of these businesses are also total monsters. There is a CFA youtuber I like who recently did a deep dive on AllState and by his modeling he thought they should provide a 20% IRR the next 5-10 years. Here's his video analysis:

https://www.youtube.com/watch?v=PjgxF8dFAf4

Holding JPM for the dividend yield is good. MS and GS are dogs.

I keep that out of the portfolio due to long-term drama with those firms on the institutional side lol.

//opinions absolutely not advice or relevant positions\\