By John Grgurich, The Motley Fool
Filed under: Investing
The catchphrase used to be, “When E.F. Hutton talks, people listen.” Now when it comes to financial advice, you could easily insert the name Warren Buffet.
Does the Sage of Omaha need an introduction? Just in case, according to Forbes Buffet is the fourth-richest man in the world. As a general rule, he got that way by investing in companies he can easily get his head around, have powerful brands, have wide moats, and are undervalued.
Through his company, Berkshire Hathaway , Buffet invests in a little bit of everything, including bank stocks. Here are Berkshire’s top five bank holdings, along with a quick explanation of why Buffet and his team might like them:
5. M&T Bank
At around $551 million, M&T is Berkshire’s smallest bank holding. It’s a regional bank assets of about $81 billion. Not big by JPMorgan Chase standards, but big enough to do serious business and potentially exhibit serious growth, which it’s already done.
In the past year, M&T’s share price has increased by 18.68%. The bank also has a price-to-book ratio of 1.41: indicating it’s not a screaming value, but also that the bank certainly isn’t overvalued.
Small enough to get your head around, but big enough to make things happen, all at a reasonable valuation: From a Buffet perspective, what’s not to like?
4. Bank of New York Mellon
At around $555 million — just slightly more than M&T — BNY Mellon is Berkshire’s next biggest bank holding. But BNY is a big bank, the country’s eighth largest. It has nearly $360 billion in assets on its balance sheet.
That said, it’s run rather conservatively. Most of the business it does is with other banks, all of which is conducted in a straightforward manner. Ever read about BNY in the news, getting fined left and right by regulators? Or being sued by angry investors?
No, BNY is a throwback to the days when banks were beautifully boring, yet profitable. BNY has returned 14.64% to investors in the past year, and the P/B of is 0.93: all right up Buffet’s alley.
3. U.S. Bancorp
At a little over $2 billion, U.S. Bancorp is Buffet’s next biggest bank holding. Like BNY Mellon, it’s a big bank, with assets of around $353 billion.
Also like BNY Mellon, U.S. Bancorp is another bank that — for all its immensity — also operates relatively under-the-radar. And while its P/B is little high — 1.83 — its return on equity is a fabulous 14.59%, which means it’s out there making good on Buffet’s investing dollars.
In the past year, it’s only returned 4.86% of positive share-price growth, but Buffet doesn’t necessarily go for high-flyers. He’ll typically take steady, low-drama growth any day of the week.
2. American Express
This is a bit of cheat. AMEX isn’t a bank, but it’s a big financial services company that Buffet likes enough to hold more than $10 billion of.
AMEX is a classic American company that’s …read more
Source: FULL ARTICLE at DailyFinance
