Banking & Finance

Oppenheimer Lifts Financials to Overweight: 4 Large Cap Leaders to Buy

Citigroup

The stock may offer investors outstanding upside, and recent currency settlements were fully reserved for by the bank. Citigroup Inc. (NYSE: C) is very cheap, trading at just 10.1 times forward earnings estimates. The nation’s fourth-largest bank by assets also delivered solid second quarter-earnings. Shares have dropped sharply from the highs printed late in July and look like a compelling buy here, especially with a dividend increase in the mix.

Numerous Wall Street analysts cite that Citigroup will be a leader in buyback payouts to shareholders. Combined with the bank’s strong domestic and international business, and a better overall economy, plus the headline risk over bank stress tests and other legal issues removed, share purchases look wise here.

Citigroup shareholders are paid a miniscule 0.36% dividend. The consensus price objective is $65.96. Shares closed Wednesday at $56.91.

Goldman Sachs

This company continues to be the gold standard of Wall Street banks and trades at a low 10.8 times estimated forward earnings. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, top investment banking and capital markets expertise, and the firm continues to be a dominant force around the world. The bank is one of the most sought after in the world, and it is one of the very few firms that dictate who can be a client.

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In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1 trillion of announced transactions last year, the highest level since 2007. It also has maintained a leading market share over the past 25 years, and a market position when M&A activity was dominated by technology in 1999, by financials in 2008 and by natural resources in 2014. The bottom line: regardless of where market strength is in any given year, Goldman Sachs is up to the task.

Goldman Sachs shareholders are paid a 1.31% dividend. The consensus price target is $219.86, and shares closed Wednesday at $201.13.

JPMorgan

This stock trades at a very low 11.1 times estimated forward earnings. JPMorgan Chase & Co. (NYSE: JPM) is expected to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on 2015 estimated price-to-earnings and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide an earnings headwind throughout this year, but so far that does not seem to be the case.

Improvement in loan growth, terrific equity capital markets and a steady increase in deposits have been a solid plus. Trading at a discount to many of the large cap banks on 2015 earnings estimates also helps upside potential. With $2.6 trillion in assets worldwide, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy.

JPMorgan investors are paid a 2.65% dividend. The consensus price target is $74.88. Shares closed on Wednesday at $67.24.

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Given the market uneasiness, now is the time to stick with the large cap leaders. All these stocks make good sense for growth portfolios, and all have come in nicely from 52-week highs, which presents investors with solid entry points.

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