5 Bank Stocks That Can't Stop Posting Profits
Updated with Bank of America and Citigroup upgrades.
NEW YORK (TheStreet) -- While the business media tends to focus on stocks that are hot right now, it can pay to take a longer-term approach on occasion.
An excellent way to pick bank stocks at the beginning of 2012 turned out to be focusing on the beleaguered big names trading at the greatest discounts to tangible book value, which included Bank of America (BAC) , which was trading for just 0.4 times tangible book value after dropping 58% during 2011, and Citigroup (C) , which traded for roughly half its tangible book value after falling by 44%, there was a host of large-bank plays trading at significant discounts to book value. Bank of America's stock wound up returning 110% during 2012, while Citigroup's shares returned 51%.
The book-value plays are no longer an obvious way to go. Shares of Bank of America traded for 0.9 times their reported Sept. 30 tangible book value of 13.48, when they closed-out 2012 at $11.61. Citigroup's shares closed at $39.56 Monday, trading for 0.8 times their reported Sept. 30 tangible book value of $52.70.
Then again, with Congress and President Obama averting the Fiscal Cliff late on Tuesday, some analysts believe that these two stocks will be headed much higher. Guggenheim analyst Marty Mosby on Thursday closed his "short-term trading sell" call on Bank of America, saying that the Fiscal Cliff agreement "mitigates much of the economic short-run bite," that would have been felt if the full set of mandated federal income tax increases and spending cuts had taken place. Mosby rates Bank of America a "Buy," with a $14 price target.
Also on Thursday, Sterne Agee analyst Todd Hagerman upgraded Citigroup to a "Buy" rating from a neutral rating, while raising his price target for the shares to $50 from $38, saying that the appointment of Michael Corbat as CEO in October was "a game changer." Citigroup last month announced a series of moves cut annual expenses by up to $1.1 billion by laying off 11,000 employees and closing 84 branches while giving up only $300 million in annual revenue. Hagerman said that Citi "operates a unique global banking franchise, which would be extremely difficult to replicate and has re-emerged as a compelling restructuring play heading into 2013.