US Financials have had a great run since the US election, but have pulled back as the bond markets have rallied following the failed US Health care bill and a FED which does’nt seem to be in any rush to raise rates soon….
The pull back is a potential buying opportunity, especially Goldman Sachs which reported a disappointing quarter where their fixed income trading revenues disappointed – maybe they were caught offside on the bond rally!
Remember MS which reported a terrible quarter about a year ago – but reported a great quarter in Q1 in – with earnings well exceeding expectations – even great companies have bad quarters – look for these bad quarters as a buying opportunity!
Px Vs Fair Values
$JPM 84.5 vs 83 Yield 2.3% [Dimon top CEO!]
$C 58 vs 64 Yield 1% – cheapest to Book value – but seems to be the least liked!
$MS 42 vs 44 Yield 1.9% – reported a great quarter, Gorman is doing a great job….
$GS 217 vs 250 Yield 1.4% [ 1.1 x book value] tough quarter, but they will bounce back!
$BAC 22.5 vs 24.5 Yield 1.4%
Goldmans is now the CHEAPEST of the banks, and a great buying opportunity. Mnuchin and Cohn, 2 key people in the Trump Administration are ex Goldman!
Tax reform and deregulation is coming – and these will help the banks regardless of interest rates and the shape of the yield curve.
2CentView has a core position in Morgan Stanley, added a trading position in MS at 40.5 and plans to add a trading position on Goldman Sachs tomorrow.
Suggested trade: Buy here at 217, Take profit Target 250, Stop 195.