Top Picks – Financials 843

Financial stocks are the second best sector in 2021 (after energy), and have gained 25.3%.

Banco Santander, S.A. (SAN)| Daily Alert June 17
Banco Santander is Spain’s largest bank. In addition, it is the third largest in Brazil, along with operations in Argentina, Chile, Mexico, Poland, Portugal, the UK, and the United States.

The corporation rebounded to a profit in the first quarter of this year with black ink of $1.94 billion. Chairman Ana Botin forecasts that even better results are in store. Last year, in-line with the European Central Bank’s recommendation, SAN eliminated the dividend. But with the wonderful earnings and the relaxation of the ECB regulations given the economic recovery, a payout has been reestablished. As it increases, there is an excellent chance that the share price will also jump, perhaps to our Initial Sell Target of $8.24. That is well below the $20+ where it traded a number of years ago.5

In many ways, this bank reminds us of Bank of America, which we bought at $6.76. Both of them are major players in their markets, and from our perspective in the “too big to fail” category. We finished unloading the BAC position at $38.79 for a 474% gain. It has continued to go up since.

We are happy to hold this stock and look forward to additional capital appreciation. Toss in a dividend and the returns could be luscious.
Benj Gallander, Contra the Heard Investment Letter, 416-410-4431, June 11, 2021/span>

*Wells Fargo & Company (WFC)
Under its previously weak leadership, the company never fully recovered from the 2009 financial crisis and its loose compliance culture led to a fake accounts scandal and other reputation tarnishing problems.

We continue to see early indications of a tighter compliance culture, better strategic focus and more efficient operations. Scharf is reorganizing the bank’s segments to boost transparency and push accountability deeper into the business.

First-quarter results were encouraging. However, like all banks, lending volumes remain weak, which will weigh on the net interest margin. Capital markets revenues should remain reasonably robust.

Wells Fargo’s capital strength is healthy and improving, such that the bank recently purchased $600 million of its shares. Wells looks capable of increasing its dividend next year. We remain only modestly positive on WFC shares, as much of the turnaround has already been discounted by the 1.3x tangible book value multiple.
Bruce Kaser, Cabot Undervalued Stocks Advisor,, 978-745-5532, June 22, 2021


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