Bac Dividend

I tried a rather risky investment thesis by investing in financial securities. I began to start building a position in the major financial stocks. I think the last few weeks have presented buying opportunities for finance. Three financial stocks I have invested in Wells Fargo, JP Morgan and Bank of America.

Wells Fargo is probably the best-capitalized major banks. The recent addition of Wachovia Wells Fargo has about $ 800 billion in deposits. Wells Fargo size is a major competitive advantage. They have a ratio of Tier 1 capital and a strong balance sheet. Wells is currently the 2nd largest bank in the U.S. in terms of market capitalization. Wells also has an excellent management. Wells Fargo management has already represented a devaluation of $ 74 billion portfolio of Wachovia's total loan. This should reduce the exposure Wells moving forward. Wells stock has held fairly well in recent months compared to its peers. Wells has always had a profit margin of 22% and ROE of 18% solid during the last five years. It does not hurt that Warren Buffett likes the Wells Fargo and has held for years.

JP Morgan Chase should get out of the financial crisis as the dominant player in the banking sector. JP Morgan got a flight to the acquisition of Washington Mutual and Bear Stearns well below their actual value. JP Morgan has the largest deposit base of a bank in the country which gives him a solid capital base. JPM has a strong management that has delivered a profit margin of 18% over the past 5 years. Return on average equity of 10.5%. I think it will increase in future as Jamie Dimon and company realize the synergies from the acquisition of Washington Mutual. JP Morgan is selling well below its book value and pays a healthy dividend.

Bank of America is certainly the riskiest of the 3 banks. Since its acquisition of Countrywide just before the subprime crisis to its pending merger with Merrill Lynch, Bank of America has taken some questionable measures. The Countrywide and Merrill Lynch deals, which seemed cheap before now look seriously overvalued. Bank of America shares fell, which may give the opportunity. The stock was selling for $ 10 recently, which is well below its book value. Bank of America spent an average ROE of 16% and a profit margin of 27%. I think the name of Bank of America is a major competitive advantage. Bank of America has a huge deposit base and the name BOA goodwill important. I think that the acquisition of Merrill Lynch will be a valuable brand for Bank of America in the long term. But I'm not sure of the acquisition of Countrywide. Countrywide has a damaged brand name because of its association with the heavy subprime crisis. However, I think their ability to access capital and their strong brand Bank of America will remain a viable entity.

These 3 stocks will likely continue to face a difficult situation in 2009. I think in the long term the banks will benefit from the financial crisis and come out with a market share bigger and stronger financial structure.