Great value stocks are hard to find in the large cap universe, although there are candidates to consider. This segment of the market tends to be highly efficient so we do need to go through a lot of names before we can find some potentially investment worthy values. It is also important to cast a wide net. We have looked both domestic names as well as ADRs in this screen. Here we look at financial stocks. In the previous installment reviewed the large cap non-financial stocks that met the screen criteria.
For this screen we have considered the basic price to earnings and price to book value filters. We added an additional qualification for the historical EPS growth rate to be in the highest 40% of the market.
- Market capitalization between $18.20 B and $82 B
- Price to Earnings (TTM) < 15
- Price to Book < 1.5
- EPS Growth Rate (5 year historical) in highest 40%
You will note that both P/E ratio and P/B ratio criteria is less stringent than what we normally use for small cap and mid cap screens.
The screen was run using the Fidelity screener.
The Screen Results
p/e (ttm Earnings)
eps growth (5yr)
Banco Bilbao Vizcaya Argentaria SA
Bank of New York Mellon Corp
Capital One Financial Corp
Hartford Financial Services Group Inc
Manulife Financial Corp
SunTrust Banks Inc
Notes and Observations
- BBVA: BBVA is a Spanish bank in business since 1857. It operates in Spain, Mexico, South America, Us, Turkey, Asia Pacific and rest of Europe. Valuation is very attractive and I am adding this to the VSG watchlist for further review.
- BCS: Barclays is a global bank founded in 1690. The stock seems to be on the undervalued side and I do want to look into this much closer. Added to the watchlist.
- MS: Morgan Stanley is likely undervalued based on its significantly negative enterprise value and strong balance sheet and EPS growth. Solid dividend yield as well. Adding to the watchlist.
Other stocks in the list appear to be fairly valued. The dividends are nice, and if you wish to purchase and hold for some time to generate portfolio income, they can be a solid choice.
We are currently at a pause in the federal interest rate hike, and perhaps a interest rates will move lower in the short to intermediate terms. Financial stocks become attractive when the rates are expected to move higher. This is one of the considerations you should have in mind as you look at these financial stocks. Most financials seem to be fairly valued. We found 3 that may be undervalued and likely to provide us with enough margin of safety. Interestingly, two out of these three are non-US based companies.
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