Are These Financials Winners In 2013?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As we embark on a new year, 2013 has thus far started on fire, with the general market up approximately 4.5% in the first week alone, celebrating on a temporary fix to the “Fiscal Cliff.” Nonetheless, many investors are still on the hunt to try and find stocks with great prospects and the potential to outperform the general market. The three Dow financial stocks listed below seem to be worth a look as they continue to generate huge profits, have immense brand value, and trading at favorable valuations.
Financial behemoth JPMorgan (NYSE: JPM) is undoubtedly a company you have heard of and likely have done business with them in one capacity or another (I have a credit card and checking account with them myself). The company is celebrating unbelievably its 190th anniversary and has emerged as one of the big winners of the Financial meltdown in 2008-2009 generating approximately $88 billion in revenue and $18 billion in net income the past twelve months. The company has had a number of dividend hikes in recent years and not yields a very nice 2.6%, considerably above the 2.0% Fortune 500 average. In addition, trading at nice discount of .9x price to book value, while generating better than 10% returns on equity has me thinking that JPM will continue to move higher in the upcoming future and we get paid a nice 2.6% while we wait. If one is looking to diversify this holding, then one should consider what is widely believed to be the other well-capitalized mega-bank, Wells Fargo (NYSE: WFC). Having Berkshire Hathaway as your largest shareholder to the tune of 8% is almost encouraging and having a nice 2.5% dividend yield makes it all the more enticing. The company does trade at a considerably richer 1.3x price to book value compared to JPMorgan, but the company generates returns on equity approaching 12.5%, while continually showing that its astute management team is superior to the rest in the industry.
Diversified insurance and financial products company Travelers (NYSE: TRV) is celebrating its 150th anniversary this year and the company is doing so on a high note. With over $25 billion in revenue and $2.8 billion in net income in the trailing twelve months, the company is no slouch. Moreover, with the company trading essentially at book value while generating strong returns on equity of 11% and comparatively strong returns on assets of 2.5%, the stock looks poised to continue moving higher. Add in the tasty 2.5% dividend which is currently just a 25% payout ratio and investors should feel confident that it will continue to be raised.
Ubiquitous credit services and financial solutions provider American Express (NYSE: AXP) is another company demonstrating its staying power being in business since 1850. Count this, like Wells Fargo mentioned above, as another company where legendary value investing firm Berkshire Hathaway is the largest shareholder to the tune of 13.5%. While the company trades at a rich premium to book value, one must note the very strong returns on equity of 27% and immense brand value and economies of scale among other assets not captured through the balance sheet. Add in the fact that the company has exceeded consensus analyst estimates in three of the past four quarters and continues to gush free-cash-flow in excess of $9 billion and the stock has some great future prospects.
In conclusion these well-managed companies should provide solid, long-term results while paying a nice dividend. Thank you for your time.
Wiseinvestors has no position in any stocks mentioned. The Motley Fool recommends American Express Company and Wells Fargo & Company. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells Fargo & Company. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!