Barron's: How To Play The Post-January Rebound

Nelson Hem

Sun, Jan 31, 2016, 5:49 PM

With the markets off sharply in January, investors should position themselves for a rebound, says this week's cover story in Barron's. And the beginning of the year selloff has left the banking sector looking like one of the best bargains around.

"Time to Buy Bank Stocks" by Andrew Bary points out that big U.S. banks are in better shape than they have been in years, and yet they trade at levels last seen in 2011. Also, in the markets overall, five of the six weaker Januarys on record were followed by gains in the rest of the year.

"This is an exciting time," declares one analyst quoted in the article. "Bank balance sheets are as strong as they've been in decades, and stock prices resemble recession troughs. Earnings are more stable than they have been in decades, and capital ratios are at the highest levels in 80 years."

How the 10 leading banks and investment banks have fared is laid out in a table that includes share prices, year-to-date change, earnings, price-to-earnings (P/E) ratios, yields and more. See why Barron's thinks there is probably at least 20 percent upside in all those banks, including Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C) and Wells Fargo & Co (NYSE: WFC).

The banks do face some headwinds, however. See how bank executives have responded to concerns about the industry's loans to the increasingly distressed U.S. energy sector. There is also the political climate, with rhetoric coming from presidential candidates on both sides. And how will the industry fare if the Federal Reserve does not increase interest rates as expected?

When it comes to the individual banks, see which one is called the "LeBron James of banking," which one is the cheapest of the bunch now and whether Warren Buffett's favorite bank looks appealing now. Barron's even says that one of the larger regional banks has "one of the industry's best CEOs."

A companion article looks at another sector to consider for a rebound. Alexander Eule's "5 Battered Tech Stocks to Buy Now" suggests that the market storm has created bargains in the likes of Akamai Technologies, Inc. (NASDAQ: AKAM) and Western Digital Corp (NASDAQ: WDC).

"These companies didn't go bad overnight," says an expert quoted in the article. "And what we're seeing is true opportunity."

Just don't expect January's tech sale to last, says Barron's.

At the time of this writing, the author had no position in the mentioned equities.
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