Stock Analysis Can Give Surprising Results

An Example on How In-depth Stock Analysis Can Give Surprising Results

Sometimes in stock trading, you need to think and act contrary to what’s obvious. In-depth stock analysis gives you the data that makes the difference. 

To succeed in stock trading and investing, in-depth and expert stock analysis could sometimes lead you to do something contrary to popular opinion. That’s because you have thought over things in a different dimension, and you’ve learnt something others haven’t. In the banking sector, there could be something like this going on.

One of the basic elements of understanding the stock market – that many investors follow – is that when the economy is strong, the volatility that crops up is something temporary. And that’s when buying on dips becomes the preferred strategy. Moving across bank stocks, experienced analyst Martin Tillier reckons there is much to choose but he is particularly attracted to Sun Trust Banks ($STI).

$BBT Gets Upgrades though Nothing Is Remarkable on the Growth Front

Interestingly, Tillier was attracted to Sun Trust after one of its rivals got upgrades from Wells Fargo and B. Riley. This rival is BB&T ($BBT). BBT hasn’t had a particularly scorching performance recently. Being a conservative regional bank based in the Southern region, they did well in the period of the credit crisis a decade back and also during the early stages of recovery. But Tillier doesn’t find that conservatism suited to the present environment that presents major growth opportunities to regional banks. And BB&T has failed to exploit these opportunities, when examining from the perspective of growth.

BB&T has experienced annually declining EPS in two of the past four years. Though you could argue that its dividend has increased significantly during that period, you need to look at Sun Trust that has also managed to raise its dividend with simultaneous steady growth.

$BBT’s Valuation Causes It to Be Upgraded

For BB&T, it was the valuation that caused it to be upgraded. Its P/E (Price to Earnings) ratio and Price/Book ratio are below average, which indicates value and makes the stock attractive. The trailing and forward P/Es are in the region of 19 and 12.5 which are attractive since they are below the market average. Tillier believes that with the mildly stretched nature of the current market, anything that is lesser than an average multiple and being available at somewhere in the region of one and a half times the book value is worth considering.

But then, Tillier applies the same logic to Sun Trust and finds that the latter is better. The company has a lower trailing P/E at 15, while the forward P/E ratio and the Price/Book ratio are lower as well. And considering the PEG ratio too, which is the growth that could come at the potential value measure, you find $STI coming out below 1 – an indication of good value. BB&T is somewhere near 2.

In-depth Analysis Makes You Head to $STI, Not $BBT

So while $BBT manages to get the spotlight as a result of these upgrades, Tillier believes it is $STI that is underperforming the wider market because of the upgrades for its rivals. But, ironically, the factors that have made BB&T attractive now are the ones that could benefit Sun Trust. So Tillier reckons that while it may sound absurd to buy $STI as a result of upgrades to its competitor, that’s the way to go and the current anomaly between these rival banking stocks will soon be set right. Trade $BBT and $STI commission free on a free trading platform with TradeZero.

 

This content is restricted to site members. If you are an existing user, please log in. New users may register below for FREE.

Existing Users Log In
   
New User Registration
*Required field
Tradezero
TradeZero is an online broker dealer that offers commission free trading of the US equity markets, US equity and index options trading. Its clients receive up to 6 to 1 intraday leverage and the ability to trade the US markets without any pattern day trading rules. TradeZero clients have access to a variety of cutting edge trading platforms which include real-time streaming market data.
Tradezero on FacebookTradezero on Twitter
Tradezero

Tradezero

TradeZero is an online broker dealer that offers commission free trading of the US equity markets, US equity and index options trading. Its clients receive up to 6 to 1 intraday leverage and the ability to trade the US markets without any pattern day trading rules. TradeZero clients have access to a variety of cutting edge trading platforms which include real-time streaming market data.

Comments are closed.

Translate »