Saturday, April 2, 2011

"With the markets increasing volatility it is never a bad time to put a solid financial stock in your portfolio to lower your beta"

Dow Jones Industrial Average 12,376.72 (UP) Week ending 04-01-2011

It may be time to cash in one of those highly volatile tech names that you own that have run up a bit and put a little balance back into your portfolio with a solid bank and financial service name. PNC Financial Services Group Inc. (Symbol PNC, $63.72) a bank that caters to business could be a good place to start. PNC is projecting 2011 earnings of $5.63 per share and for 2012,  $6.38 per share so it trades at a very reasonable PE ratio. PNC has had a very nice 5 year sales growth rate of 18.12 % and a Net profit margin of 19.50%. Not much of a dividend here, but a bank of large enough size to be a possible acquisition candidate.

REPUBLIC BANCORP A (Symbol RBCAA, $19.99) trades at a remarkably low PE of 5.  This  Louisville, KY bank has a decent dividend yield of 2.85%. Republic has Net profit margins of 23.8%
and a Book value of $17.72 per share so it is a great value here. It has a Beta volatility rating of 0.97 so it will not rock the boat of your moving portfolio value. It also has a steady 5 year sales growth rate of 8.81% , which is not to bad for a bank.

J.Pierpont Morgan

I would be remiss if I did not mention here, for a conversation on stability and low beta , the bank founded by John Pierpont Morgan the lender of last resort to railroads, banks, and governments. A one man "federal reserve" , they said to look into his eyes was like looking into the headlights of an oncoming freight train.

JPMorgan Chase & Co. (Symbol JPM, $46.35) has a low PE of 9.7 . Book value on this stock is $44.28 per share and it has a low beta volatility 1.15 so you can sleep at night here with this one. Earnings for 2011 are projected at $4.78 per share and for 2012 , $5.61 per share. They have on their balance sheet 2.18 Trillion dollars in assets, (and big liabilities to go with them), and 930 Billion in deposits. (Maybe they should keep our Social Security payments from our paychecks here so it doesn't get spent!).

I would also like to include a savings and loan financial institution in the small cap category. New York Community Bancorp Inc. (Symbol NYB,  $17.37 ) offers a  5.76% dividend yield. NYB has a Beta volatility ratio of 0.75, operates at Net profit margins of 24%, and has a five year sales growth of 10.24%. The stock has not moved much, (Total return 12 month, 11.5%) because the dividend is an 80% payout ratio. but you will certainly hold on to your principle.

Remember what Will Rogers said , " The quickest way to double your money is to fold it and put it back in your pocket."

So reign in the volatility a little bit on your high beta portfolio and plug in one of these names in your list of diversified stocks.


1 comment:

  1. April 7th - PNC Financial Raises Dividend 250%!

    Lookin good