Jay Woods, Chief Global Strategist for Freedom Capital Markets, explains why he’s so high on regional banks.
Transcript:
Caroline Woods: So we are heading into the second half of the year. And you are bullish on regional banks. Tell us why now is the time to buy regional banks?
Jay Woods: Well, there are a few reasons why I like regional banks. You know one they’ve been a laggard. They’ve been beaten down for quite some time. And technically they’re starting to come back. We’re starting to see the KRE and the BK. The two indexes that follow regional banks closely start to come back above its 200 day moving average. So as a technician that’s a barometer of health. And then when you talk about the story of the regional banks, they haven’t done anything in a long time. But one thing we’re starting to see. One, we’re trading an all time new highs. That’s usually very bullish. Two what’s leading us JP Morgan, Goldman Sachs, the big banks, the big financials. We just got through the stress test on Friday before we taped this, 22 banks. You know now are able to pay more dividend. They basically pass the test. That said in the worst case scenario do you have enough capital on in control to survive these situations. And they did. So this gives them a little more freedom. What could that freedom do. It could actually look to M&A. So we got a little whisper rumor, rumor, not truth. But Bank of New York was talking to Northern Trust of Chicago, a regional bank, about a potential merger. So what I went back and I did is I looked when’s the last time we had a clean merger. And when I say clean, I mean a bank that didn’t need to be saved. Like when you look at the Signature Bank and the regional banking crisis we had in the early 2020s, or going back to an old timer like me. The regional banking crisis when we had Lehman and Bear go under and people merge out of necessity. We’ve only had one, and that was 2019. That was Truist, which was formed by SunTrust and BB&T, and that was a $60 million $60 billion deal. And since then, nothing. We didn’t have a clean merger since 2006. Ironically, BNY involved in that. They took over Mellon, BNY Mellon, Pittsburgh bank. So to me, when you talked about this administration coming into power, where they’re going to be more M&A activities, well, where has there been no M&A activity. It’s in the regional banks. And then I look at one of the fintechs in the regional bank, Sofi breaking out. So that one looks good. Technically the others are just coming back above their 200 day moving average. Have room to run to highs like a PNC and NT bank. So I just am excited about this sector, especially from a risk reward point of view, because I think the worst is behind them as far as we go. And then what else has happened. Rates rates have been stable. OK that’s great. We may cut rates. That’s that’s a good tailwind as well.
Caroline Woods: Tell us some names, regional bank names that you would buy right now.
Jay Woods: All right PNC Bank AA bank SoFi. Those are my top three. You think about the ballparks. You know, the comerica’s of the world. Truist where the Braves play. These are solid names. And these are names that I think will continue to do well over the coming term.
Caroline Woods: Would you buy any of the big banks because those are trading at or near all time highs.
Jay Woods: That’s where I like to do is I like to buy the strength. And of course JP Morgan, Goldman Sachs, they’ve gone on tremendous runs. Now here’s the thing. You’re not going to time them. Well, I would rather wait for a pullback than the Chase of Goldman and JP Morgan after the runs they’ve had over the last six weeks, to end the quarter. And there are levels as a technician where I think any pullback in one of these names is good, but these are great long term names. And I think that the road for the next two years is set for them to continue to be the leaders in this market.
Subscribe |
Earn. Live. Invest. |
TheStreet Pro |
#bank #analysis #technicalanalysis
source
