Stock Talk - Dan Werner, Morningstar
Jan 17, 2013|
Stock Talk - Dan Werner, Morningstar
Transcript - will not be 100% accurate
Can't werder is an analyst at Morningstar he joins us this morning to talk about three different bank stocks good morning Dan welcome to the show. Morning thanks very evidently you're of the opinion that it. Might be safety venture back -- did financial stocks most investors been staying away from him for the last 45 years. Yet you know the did the environment he has has improved from the quote critical standpoint although. You know looking ported it is a top banking environments from from several standpoint you have additional regulatory cost. As regulations and Dodd-Frank -- eventually followed propagate into regulation. It's going to be if these smaller spectacularly hard we're still in this low interest rate environment which is tough. When it comes to that's a pricing. Terms you know pricing. You know an old assets that may have been. Yielding 67% -- not coming on at 45%. Com. And you know it it's you know that the banks have been having to address the cost structures and Patrick Carter look at what they have to do that's. A look at a few of your picks because you're dead first one seems to be -- pretty good dividend Payer and that's first merit corporation. FM ER this as a dividend of more than 4%. 4% dividend. It's right now only fourteen billion dollar bank they just announced the deal on September to become a to acquire bank in which -- called citizens republic which is gonna make them pay out 24 billion dollar bank. Basically that that would be resolved FirstMerit is kind of bridge has as a locations in the Chicago area and then as a kind of a wide gap. Two Ohio which is where were the primary in Cleveland Columbus. This citizens republic will kind of bridge that they have primary of their locations and missed in Wisconsin. Their middle market Lander. -- -- Bitten -- its loan and deposit growth they've maintain they're there there a margin very steadily here around three and a half percent. What do you think the stock might be worth dizzy you get paid for waiting on this when you buy it today at say fourteen dollars a share even if it doesn't go up you make -- 4% on your money. Yep and I think it gets to nineteen it's at at some point here. And you know which is about -- -- entered. You know 2014 earnings I know that's a little far out but that's kind of how we could looking at the stock here it's kind of more the longer term play. Especially when they get all the cost savings the the acquisition which is going to be about 2223%. Of but the -- -- so that's kind of where. But the deal makes sense for FirstMerit. All right US Bancorp USB is the symbol this stock trading at 33 dollars a -- has a dividend not as robust as first merit -- about. Because of the government. Putting restrictions on -- they've pretty much still restricted US peace dividend to 30% of an income although they do buy back a lot of stock they do return probably about seventy to 80% of that are earnings in. 22 back to shareholders either in the form of dividends or buy backs so. That the -- government. As is gonna review again this this spring what kind of and that they're gonna be able to pay. We think that there would be able to get up to wait 21 or point two cent dividend right now it's not nineteen. It's you know it's a little it's it's -- it's at 1015% increase. But. You know that we we like this coming because nearly half their revenues are from the income largely because their payment processing business. They're not nearly as subject to. That the spread income that that a lot of banks are big barking its equity -- -- They're located when it by states primarily in the west and midwest they have the top five position and deposits and fifteen of those states they're very sound underwriter. On and we we just like we just think we think it's companies or 37 districts and -- as treating 32 directory. You also like Capital One no this is the credit card companies -- with those crazy ads. It's that it hit it into credit card company but it's more than that it's it's speak if it bought it it is. In as a bank in the New York area and has a bank in Louisiana. And they've been opening loan production offices across the country to be a consumer lender. You know for autos for you know -- space community home equity index and consumer lending can pick up you know it's far is how much. It is credit card price about 40% of it's still credit -- -- but even with that you know -- the nonperforming loans that. Declined to -- 2% which normally with a credit card lender you talk about 5% nonperforming -- so. They do a nice job to do very good underwriting. And the they're really -- national brand that that that -- start taking out -- thank. All right and what Yates 61 dollars would you say I think it's worth. Seven. Or 83 picks from Dan -- thanks for your time -- Thank you very much Dan Werner Morningstar let me give you those stock picks if you're following along with -- us. I think you know that a lot of the scandalous that we come have come on the show you some pretty good information as relates to individual stocks. FirstMerit corporation the symbol FM ER that's a fourteen dollar stock with a 44% dividend little better than 4%. US Bancorp USB is the symbol dividend there about 2%. And and Capital One Financial Corp. CEO aft is the symbol modest dividend on capitol 10 actually I take that. Back -- -- -- and it's accurate twenty cents a share or point 3% so not much of a dividend on capitol one but he thinks it's worth seventy dollars a share. Currently trading at 61. Dollars per share so there you have it three stock picks in -- -- -- USB and Capital One. Financial you know a lot of investors are attempted to time the market I want to share some stats here -- 59%. Of individual stock investors were either neutral. Or bearish on the US stock market and December 28 2011 as the S&P. 500 was basically flat for the year when he needed if you're invested in stocks. You you made no money in the year 2011 the S&P gained gained 16%. In 2012. I bring this up because there's a temptation on the part of many investors. To try to time the stock market. And that's an example of where it's very difficult to -- people don't really understand with the stocks are expensive or whether stocks are cheap. They tried time at the end of 2011 and they missed out only 16% rally in 2012. -- there's a story about Pratt and Whitney will cover that next on the financial exchange.