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Only One Bank Fails Fed’s Stress Test

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The banking industry is based almost entirely on the confidence of intermediaries and counterparties that make up the building blocks of the financial system. An investment in a bank or money center must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Though we don’t expect one anytime soon, it’s worth noting that there have been three significant banking crises during the past three decades alone: the savings and loan crisis of the late 1980s/early 1990s; the fall of Long-Term Capital Management and the Russian/Asian financial crisis of the late 1990s; and the Great Recession of the last decade that not only toppled Lehman Brothers, Bear Stearns, Washington Mutual, … Read more

Surveying Fourth Quarter Performance at the Money Center Banks

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Let’s examine a number of reasons why we don’t prefer banking entities and take a look at recent performance from industry constituents. A challenging rate environment and declining mortgage originations offer key headwinds.

Banks Pass Self-Administered Stress Tests

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The cohort of “too big to fail” banks such as JP Morgan (click ticker for report: ), Bank of America (click ticker for report: ), Goldman Sachs (click ticker for report: ), Wells Fargo (click ticker for report: ) and Citi (click ticker for report: ) recently released self-administered “stress tests” to see if they could withstand turbulent economic conditions. According to the banks, they are all in great shape and can meet minimum capital requirements in the event of adverse economic conditions. These tests, self-administered, are secondary to the annual March stress test performed by the Federal Reserve. However, these tests have the similar assumptions to mimic how well the banks would hold up if economic conditions returned to … Read more

The Mortgage Refinancing Boom Could Be Ending

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Early Wednesday morning, the Mortgage Banker’s Association (MBA) announced that refinancing activity declined 20% from one week earlier. Adjusted for the Labor Day weekend, total mortgage applications dropped 13.5% from the previous week. Consistent with the dramatic upward movement in interest rates, refinancing activity is down 71% since it peaked during the week of May 3, 2013. Why Do We Monitoring Refinancing Activity? When homeowners refinance, a couple outcomes can occur that pump more dollars into the economy. First, with a refinanced mortgage, owners may choose to take equity out of the home, allowing for large purchases like vehicles or even home remodeling. CoreLogic recently reported that 2.5 million more residential properties have returned to positive equity in the second quarter … Read more

Legal Costs Cloud Citigroup’s Earnings Potential

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International banking power Citigroup (click ticker for report: ) reported solid second quarter results Monday morning. Revenue increased 7% year-over-year to $20 billion, exceeding consensus expectations. Earnings were even better, growing 25% year-over-year on a non-GAAP basis to $1.25 per share, handily exceeding consensus estimates. Still, return on equity (ROE) was well below that of Wells Fargo (click ticker for report: ) and JP Morgan (click ticker for report: ), both of which reported late last week, coming in at 8.8%. Wells Fargo’s ROE was 14% while JP Morgan’s ROE was 17% in their most recent quarters. On a capital adequacy basis, Citi looks relatively strong, with its Basel I Tier 1 common ratio currently sitting at 12.2% (above the … Read more

The Valuentum Ideas100; A Compilation of the Highest-Quality Firms on the Market Today!

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Financial advisors and investors literally have thousands of stocks—large and small, domestic and foreign–to choose from. So what are they to do, and where can they go to find the most trusted opinions on the highest-quality companies on the market today?   That’s the question we seek to answer with our Valuentum Ideas100 publication. In this document, we showcase the highest-quality firms from each sector (100 in total) on the basis of our assessment of their competitive advantages (ROIC less WACC spread) and risk profiles (our ValueRisk™ rating). We believe the strength and sustainability of a firm’s return on invested capital (ROIC) is the best quantitative way to assess a company’s competitive advantages, and we believe a deep dive into … Read more

Dividend Growth Portfolio Modeling Made Easy!

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Empowering Dividend Growth Investors Do you or your clients have a dividend growth portfolio? If so, this model is indispensable. It’s the best tool out there to account for the quarterly reinvestment of growing dividends after adjusting for future equity price growth in a portfolio setting. This model will allow you to better plan for your and your clients’ retirement needs and has unmatched functionality. Plus, this tool has easy-to-follow instructions and is customized to provide deliverable print outs for you or your clients. Your firm’s logo can be added, too. To purchase Valuentum’s Dividend Growth Retirement Portfolio Model (Calculator), please click here! The model, built by Brian Nelson, CFA, sets out to do much more than what other simple dividend … Read more

Leucadia: Berkshire Light?

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After acquiring the remaining shares outstanding of Jefferies (JEF) a few months ago, Leucadia (LUK) has come into the spotlight. This under-the-radar holding company has been compared to Berkshire Hathaway (BRK.A) in the sense that it owns several unrelated companies and uses the cash flows to invest in different businesses. However, calling the two firms similar is a bit of a misstatement given Berkshire’s enormous insurance operations, and a slightly different investing style. Unlike Berkshire, which has an enormous “elephant gun” able to acquire relatively large companies with ease (Berkshire also tends to concentrate on reliable, large cap companies with strong balance sheets), Leucadia concentrates on deep value in struggling or unloved companies and industries. Interestingly enough, the companies are … Read more