Bank Stocks: 2012 Winners
NEW YORK (TheStreet) -- Bank Stocks had a banner recovery year during 2012, with the KBW Bank Index KBW Bank Index (I:BKX) returning 30%.
Banks were ahead of the broad indexes during what could only be described as a solid year for the entire U.S. stock market. The Dow Jones Industrial Average (^DJI) rose 7% for the year, to close at 13,104.14, while the S&P 500 (SPX.X) was up 13% to close at 1,426.19, and the NASDAQ Composite (^IXIC) rose 16% to close at 3,019.51, despite the year-end swoon of Apple (AAPL) .
Then again, with so much year-end profit taking, in part because of the expected increase in capital gains taxes in 2013, and with the shares now trading for $533.03, or only 10.9 times the consensus fiscal 2013 EPS estimate of $48.81 among analysts polled by Thomson Reuters, Apple could well be your best play for 2013.
Stocks on Monday continued to rise after President Obama said in the afternoon that a budget deal to avert the Fiscal Cliff was "in sight," but that the leaders of the Senate and the House of Representatives were still negotiating. Bloomberg earlier reported that Senate Minority Leader Mitch McConnell (R., Ken.) was nearing a compromise budget deal with Vice President Joe Biden. Of course, even if McConnell and Biden are in lock-step, the big hurdle will be for Speaker of the House John Boehner (R., Ohio) to twist enough Republican arms in the House of Representatives to agree to income tax rate increases for higher income earners.
The 2012 winner among the 24 components of the KBW Bank Index was Bank of America (BAC) , with shares rising 110% to close Monday at $11.60. The 2012 recovery followed a 58% decline during 2011. The shares were still down 12% since the end of 2010.
If you were picking a bank stock a year ago, Bank of America was certainly attractive, as the shares were trading for only 0.4 times tangible book value. As of Monday's close, the shares traded for 0.9 times their reported Sept. 30 tangible book value of $13.48. The shares appeared relatively price, at 12.1 times the consensus 2013 EPS estimate of 96 cents. Then again, sell-side analysts believe that CEO Brian Moynihan's cost-cutting program will bear fruit and that the company earnings will begin a multi-year climb as the housing recovery continues. The consensus 2014 EPS estimate is $1.25.