Stock Pick

  • Which is the cheapest ASX bank stock on the market?

    Man asking financial questions

    It’s a tough time to be an ASX bank investor! These popular but embattled stocks are being pulled apart by bulls and bears trying to work out the right valuations for these shares.

    The impending COVID-19 depression is turning the valuation exercise into nothing more than a guessing game.

    It’s the fog of war! No one knows how bad the economic implosion will be as the ranks of the unemployed swell around the world and loan defaults grow.

    Perhaps the easier strategy is to buy the cheapest ASX bank stock instead of trying to pick the bottom.

    Value is a defensive quality

    We know that the COVID-19 pandemic will come to an end and the banking sector will rebound. Buying the best value bank stock will provide some downside protection as more bad news is reflected in the price, but yet will generate the best return when confidence returns.

    That makes sense on paper. But the usual tools used to value ASX banks, such as dividend yield, have proven to be as credible as alchemy in this coronavirus climate!

    Experts have increasingly turning to the price-to-book (P/BV) value multiple as a yardstick to value banks, and one bank in particular stands out as being very cheap.

    Valuing ASX bank shares

    Before I get into which bank this is, it’s important to understand what P/BV is measuring. This multiple takes the market cap of a company and divides it by the firm’s net assets, that is its total assets minus all its liabilities.

    To put it in another way, it’s the value that is left in the company after it sells all its assets and paid off its liabilities. The smaller the P/BV, the more value there is in the company. A multiple of under 1 is usually well regarded.

    There is a reason why P/BV is favoured over the more commonly used price-earnings (P/E) multiple during times of extreme uncertainty. Working out the “E” for the next year in the midst of a crisis is too difficult.

    While there are some variables you need to forecast for P/BV, it’s a more conservative way to measure value when risks are high.

    Throwing the book at the banks

    Three of our four big banks are trading at around 0.8 times P/BV and that’s encouraging for the bulls. These banks are Australia and New Zealand Banking GrpLtd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).

    Commonwealth Bank of Australia (ASX: CBA) is the exception with a P/BV over 1, but you have to pay a premium for quality, and CBA is clearly the best of the big four.

    But if you want to buy deep value, UK-focused lender V MONEY UK/IDR UNRESTR (ASX: VUK) may be your answer.

    Is this the most undervalued ASX bank stock?

    The bank’s P/BV multiple only stands at little more than 0.2 times, according to Macquarie Group Ltd (ASX: MQG).

    This makes V Money, or better known as Virgin Money, cheaper than almost all of its UK peers too.

    What’s more, the broker believes V Money’s balance sheet is more defensive than its UK competitors.

    Macquarie is recommending the stock as “outperform” (which means “buy) with a 12-momth price target of $2.15 a share.

    This suggests a near 50% upside to the stock’s Friday closing price of $1.44. It’s hard to imagine our big four banks generating that kind of return over the same period.

    Another thing, you don’t have to worry about V Money disappointing the market with a dividend cut or suspension. The stock doesn’t pay a dividend and the market isn’t pricing one in – at least not in the foreseeable future.

    Who would have thought not ever paying a dividend would be seen as a defensive trait?

    NEW: Expert names top dividend stock for 2020 (free report)

    When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*

    Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.

    This fully franked “under the radar” company is currently trading more than 24% below its all time high and paying a 6.7% grossed up dividend

    The name of this dividend dynamo and the full investment case is revealed in this brand new free report.

    But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.

    See the top dividend stock for 2020

    *Returns as of 7/4/20

    More reading

    Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

    The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Which is the cheapest ASX bank stock on the market? appeared first on Motley Fool Australia.

    from Motley Fool Australia https://ift.tt/3dtkVpp

  • Wells Fargo Is the Ugliest Bank Stock on the Planet

    Wells Fargo Is the Ugliest Bank Stock on the PlanetThe gap between the haves and have-nots is widening. And bank stocks like Wells Fargo (NYSE:WFC) find themselves on the losing side of the gulf. But the company's pain can be your gain if you know how to play it. Let's break down the relative weakness in financials and potential strategies for capitalizing on WFC stock.Source: Martina Badini / Shutterstock.com How well you've performed during the market recovery has depended in large part on the sector and size of your holdings. Technology has been killing it and financials have gotten killed. Relatively speaking that is.The same goes for market cap. Large-caps have soared while small-caps have soured. A simple way to measure the performance of one area versus another is with a chart overlay. Let's first look at the Technology SPDR (NYSEARCA:XLK), Financial SPDR (NYSEARCA:XLF) and the S&P 500.InvestorPlace – Stock Market News, Stock Advice & Trading Tips Examining the Yucky Financials SectorWith this week's rally, the tech sector's year-to-date performance has returned to unchanged, which is utterly incredible given that we've the novel coronavirus pandemic and skyrocketing unemployment. By comparison, the S&P 500 is down 11.45%.But it's financials and bank stocks that have been left in the dust. For example, XLF fell as much as 43% and is still down 30% on the year. That doesn't bode well for trying to buy names like WFC stock.Source: The thinkorswim® platform from TD Ameritrade In situations like this, it's usually better to buy leading stocks in leading sectors than fishing for lagging stocks in lagging sectors. And, as we'll show next, WFC stock is undoubtedly one of the weakest holdings in its sector. * 10 Key Stocks to Watch Over the Next Few Months But that's also why it's so compelling as a bear candidate. Here is the same graphic but with Wells Fargo added on (pink line).Source: The thinkorswim® platform from TD Ameritrade Not only did it fall further than XLF, but it also continued plumbing the depths, hitting a new low just this week. And April was the market's best monthly gain since 1987. If WFC doesn't score any gains with that type of big-league buying going on in the background, then you know the Street hates it. A Closer Look At the WFC Stock ChartThe past two months have seen a great deal of chop since Wells Fargo found buyers at $25.11 on March 23. We've had an earnings announcement along the way that proved powerless to lift the stock out of its malaise. Thursday marked the sixth straight down day, with the past three accompanied by heavy volume that confirms institutions are pouncing on the stock. Tack on the fact that we're a whisker away from breaking March's lows, and the outlook is about as bad as it gets.Source: The thinkorswim® platform from TD Ameritrade What's particularly troublesome is that all of this deterioration is taking place while the broader market is holding firm. If this is how Wells Fargo behaves on a good week in the market, then it really makes you wonder how bad it could get if we see the overall market rollover.With WFC stock at a relatively cheap $25, I think bears have a variety of strategies at their disposal. If you don't mind the higher capital requirement and inherent unlimited risk, you could short shares with a stop over the 20-day moving average at $28. For a cheaper, higher-octane bet, you could buy puts. The Jun $27.50 puts at $3.00 offer a good bang for your buck. I'd probably use the same stop loss at $28.Finally, you could consider purchasing July put spreads. It's the cheapest wager of the three and offers a leveraged payout if WFC falls to $20 by expiration. The cost, and risk, is $1.45. The potential profit is $3.55.For a free trial to the best trading community on the planet and Tyler's current home, click here! As of this writing, Tyler didn't hold positions in any of the aforementioned securities. More From InvestorPlace * America's 1 Stock Picker Reveals Next 1,000% Winner * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * The 1 Stock All Retirees Must Own The post Wells Fargo Is the Ugliest Bank Stock on the Planet appeared first on InvestorPlace.

    from Yahoo Finance https://ift.tt/2WFKXip

  • What Shanghai Disneyland’s reopening says about consumer demand post-COVID-19

    What Shanghai Disneyland’s reopening says about consumer demand post-COVID-19When tickets for the May 11 reopening of Shanghai Disneyland went on sale, they sold out within minutes. Park officials said they are taking “a deliberate approach”, such as requiring physical distancing and sharply reducing capacity. Jen Rogers, Myles Udland and Akiko Fujita discuss what the reopening of the first major theme park says about consumer demand post-coronavirus.

    from Yahoo Finance https://ift.tt/3cii7v6

The Latest

  • An economist’s expectations for coronavirus and beyond

    ·

  • Why Advance Nanotek, Macquarie, Tyro, & Zip Co shares are charging higher

    ·

  • Are ASX retail shares undervalued today?

    ·

  • Stock market is almost back to where it was before all this coronavirus crap happened! Makes no FUCKING SENSE! How long can the government keep their Brrrrrrrrr infinite fucking money solution going for!?

    ·