While the stock market has plowed to new highs, investors have still cast a very wary eye toward financials, especially the mega-cap banks. Who can blame them, with countless billion-dollar judgments, slowing brokerage trading revenues and a general dislike directed toward the sector by the average American?
Despite all the negatives, the sector has underperformed the overall market and could give investors a better risk-reward balance for the rest of 2014. A new research report from the banking analysts at Baird maintains that enthusiasm around improving loan growth should help offset potentially weaker net interest margin guidance. They see the best risk/reward in the money center banks, which seem under-owned relative to the larger regionals.
Here are the top mega-cap banks to own from Baird. All are rated Overweight.
Capital One Financial Corp. (NYSE: COF) has continued running its string of quirky commercials to grow its credit card business, and it trades at a low 11.7 times earnings. Capital One also offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. With more than 900 branches around the United States, the company has more than $206.9 billion in assets.
Capital One investors are paid a 1.4% dividend. Baird raises its price target on the stock from $81 to $90. The Thomson/First Call consensus price target is posted at $84.29. The stock closed Wednesday at $83.60 a share.