5 Financial Stocks That Can Bounce Back
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The financial markets have been beaten over the last three years with most financial stocks dropping down like a bird with no wings. Unfortunately, the market was wrong to predict that the financial market would make a comeback in fiscal year 2010 because mostly everything remained stagnant. It was not until recently that financial markets are gaining momentum with some stocks making a quicker comeback than others. There’s no need to spend your valuable time trying to figure out which financial stocks to buy because we have done the work for you – here is a list of five financials stocks to buy now.
Fifth Third Bancorp (NASDAQ: FITB): Fifth Bancorp is now approaching its 52-week high of $15.75. In fact, the stock has been on a bullish trend since late 2008. Moreover, from a technical perspective, the stock is well on its way back to trading around the $40 range. The stock has earnings per share and annual dividend of $1.15 and $0.32, respectively, with a yield of 2.38%. Fifth Bancorp has increased its dividend twice during the last four quarters.
As the financial markets recover from a tumultuous recession, the stock’s revenue, net income, and earnings per share are expected to benefit substantially. Thus, I believe right now is a good time to jump in the wagon and purchase some shares of this stock for your portfolio.
U.S. Bancorp (NYSE: USB): U.S. Bancorp is another stock that has made a comeback from the shadow because it’s now trading close to its 52-week high of around $30. With sales and income growth of 4% and 42%, respectively over the last year, and earnings per share of $2.46, the stock is quickly gaining a strong bullish momentum from investors who are betting the stock will go much higher this year.
The stock is in a much healthier financial position because it increased its dividend in fiscal year 2011 from $0.05 to $0.11 per share. I believe this is a strong indication that management feels confident in its ability to thrive again as the financial markets and economy recover from a tough recession. Thus, I think right now would be a good time to add some shares to your portfolio to take advantage of this bullish trend of this stock. Even from a technical perspective, it’s obvious the stock is on its way to trade in the high $30’s.
UBS AG (NYSE: UBS): UBS stopped its dividend back in 2008 when the economy crashed and all stocks dropped substantially. But, it has been slowly recovering since then and is now trading above its 52-week low of about $10. The stock does not look cheap with a price to earnings ratio of 9.02, which is higher than its competitors Citigroup (C) and Credit Suisse Group (CS) but lower than HSBC Holdings plc (HBC).
Cash flow from operating activities for fiscal year was almost 12 billion Swiss francs or about 13 billion USD (at current exchange rate of $1.086 per Swiss franc). Revenue has been increasing year over year after 2008, when it decreased substantially due to the recession. Moreover, the stock was profitable again in fiscal year 2010 after suffering losses three years before that due to harsh economic conditions around the world. From my point of view, the stock may even begin issuing a dividend as its overall business begins to prosper again. Right now seems a good time to add some shares of UBS to your portfolio if you want to get exposure to healthy financial stocks.
Wells Fargo & Company (NYSE: WFC): Wells Fargo is another stock approaching to its 52-week high as the financial systems recovers from the recession that hit financial markets around the world. Management seems to have a positive outlook for the future because they raised its dividend from $0.05 to $0.07 in the first quarter of 2011 and again to $0.12 in the third quarter of the same year. The annual dividend is $0.48 with a yield of 1.57%.
Management has been doing a great job reducing expenses and increasing net income during the last three years, which has been leading to higher earnings per share. I think the stock has the necessary momentum to climb back to trading around $40 per share. Yes, it takes time and patience but now is a good time to add some WFC shares to your portfolio and profit from a stock that is determined to appreciate in value.
SunTrust Banks, Inc (NYSE: STI): SunTrust raised its dividend from $0.01 to $0.05 per share in the second quarter of 2011. Although revenue has been decreasing for the last five years, net income has increased for the last two years after suffering a loss in 2009.
The stock is not cheap with a price to earnings of 20.05, which is much higher than Fifth Third Bancorp (FITB), U.S. Bancorp (USB), UBS AG (UBS), Wells Fargo & Company (WFC). Nevertheless, the stock has a lot of room to trade back to the $60 range it was trading before the recession hit the financial markets. I think SunTrust will continue to trade higher as the overall economy recovers and the stock benefits from this positive progress, thus this is a healthy stock to buy now with a strong potential for appreciation in value.
IUMFool has no positions in the stocks mentioned above. The Motley Fool owns shares of Cisco Systems, Ford Motor, Intel, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Nucor, Intel, Cisco Systems, and Ford Motor. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.