Big Banks Poised for Big Gains

http://wallstnation.com/BAC-WFC-JPM-higher-next-year-11242009

If you are sitting on the sidelines, paralyzed with fear about investing in some big banks, then think about this… JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), and Bank of America Corporation (NYSE:BAC) are the leading commercial banks in America. We are coming out of the financial crisis , which sent our economy in a tailspin for the past 2 years. The stock prices of those banks are reflecting current earnings power and not normalized earnings. Given that short-term interest rates are at unheard levels (3-month treasury yields at .01%, 6-month yields at .13%, and 12-month yields at .26%), it makes the banking industry a hugely profitable business today. John Paulson projects that latter part of 2011 will begin to show the profits these banks are making, and the banks’ stock prices will reflect.

=> true, the impact of financial crisis is still on, and the trend of deleverage may still continue until unemployment rate peak (hopefully early next year). On the other hand, with the historical low interest rate that widen interest spread & lesser player in the loan market, I am sure the banks will be more profitable than ever.

Amit Shah wrote a great piece on the subject of JPM, BAC & WFC at SeekingAlpha. He states that “The banks are not paying dividends so tangible book value is increasing rapidly, and capital ratios are higher than ever in an improving economic environment.” He believes in the next few months, the large-cap U.S. banks will go much higher.

=> I think the large cap US banks already rise back to a reasonable price at recession level. I don't think price will go dramatically higher in short run.

He also describes in his article his opinions that John Paulson and Warren Buffett are far more intelligent than Meredith Whitney and Dick Bove. He believes that anyone investing based on Meredith Whitney and Dick Bove's advice will miss the next leg higher on large-cap banks. He seems to make a valid point with this.

=> that's fairly true.

Check out the full article here and also review some of his analysis and reasoning why the stocks should see higher levels next year.

Amit concludes his article with a strong point when he indicates he is long in all three bans mentioned: JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), and Bank of America Corporation (NYSE:BAC).