Not all financial stocks have gained dramatically since the big rally that followed the November election results. Using the data provided by Financial Visualization (Finviz.com), I’ve uncovered 5 bank or investment management companies that remain below their book value. Some have trended upward during that period but remain classically cheap. Using that metric to begin to identify so-called “value” stocks is one of the first steps in basic Graham and Dodd-style investment research. Here they are:
- Leucadia National Corporation (NYSE:LUK) — Today Leucadia is trading at about a 15% discount to book. The price/earnings ratio is at 15 which puts it in range of consideration as value, according to Warren Buffet’s teacher Benjamin Graham, who liked stocks with p/e’s of 15 or less. The company is paying a 1.6% dividend and the current ratio is slightly greater than 2 to 1. It looks like a lot of long-term debt, something to consider. The short float is less than 2%.
- Legg Mason, Inc. (NYSE:LM) — The large asset management firm now trades at a more than 10% discount to its book value and the price/earnings ratio of 15 is substantially lower than the market as a whole — and much lower than most big tech firms. Legg Mason is paying a 3% dividend and long-term debt seems low compared to other similar types of companies. The average daily volume is about a million shares.
- Citizens Financial Group, Inc. (NYSE:CFG) — This is a Mid-Atlantic regional bank that trades at about a 15% discount to book. The stock appears to have a reasonable long-term debt load and the price/earnings ratio is 14. CFG is paying a dividend. The short float’s at 2%. It traded in March at $39 per share and has since dropped to 32. Average daily volume is above 4 million.
- FNB Corporation (NYSE:FNB) — It’s a regional bank listed as “Southeast” — but it’s headquartered in Pittsburg. The Southeast indicates its heavy presence in North Carolina markets. The stock now trades at just about 5% below book value. The price/earnings ratio is 16 with the forward p/e at 12. Long-term debt to equity is in the green and they’re paying a 3.76% dividend. FNB trades about 3 million shares a day.
- Ares Capital Corporation (NASDAQ:ARCC) — Ares is trading just below book value, about 4% below, but there it is. The price/earning ratio is 12 and right now, they continue to pay a 9.6% dividend. The long-term debt situation is not outrageous. Average daily volume amounts to 1.4 million. Note that while all of the above are New York Stock Exchange traded, this one’s on the NASDAQ.
I created this list for those who enjoy researching stocks in the hopes of finding value. These are not recommendations — you would want to do much more extensive research before making any decisions. Obviously, there are no guarantees.
It’s interesting that with the remarkable move upward in the stock market in general, you can still apply the Graham and Dodd process and come up with relative value stocks in the financial sector, paying dividends — and sitting at what an old school analyst would have to describe as reasonable price levels. I don’t think you’ll find this type of environment among the tech sector these days.
