Barron’s: Investera i storbanker – går bättre än det verkar
Finanssektorn har fått en rejäl smäll på börsen i takt med att oron för en recession ökat. Många storbanker har rasat mer än breda index. Men bankernas underliggande affärer har än så länge varit stabilare än investerarnas förtroende för dem, skriver Barron’s.
Storbanker är som kackerlackor och kommer överleva kris efter kris. Deras intäkter kommer följa de ekonomiska cyklerna och så länge civilisationen finns kvar kommer folk behöva låna pengar och placera kapital.
Vågar man investera i en volatil framtid och låta kapitalet ligga ett tag kan det vara värt att köpa in sig i sektorn genom ETF:er, skriver tidningen.
Barron'sBanks Are Better Off Than They Look. How to Profit With This Options Strategy.
By Steven M. Sears
Barron's, 21 July 2022
Big banks, like cockroaches, are unlikely to perish from this earth. Revenue and earnings may ebb and flow with economic cycles, but people will always need money and securities and places to store them.
Everyone knows this is true, but it’s been increasingly hard to remember.
Many major bank stocks have fallen more than benchmark indexes on concerns that the economy was entering a recession, which would reduce demand for loans and other critical drivers of bank earnings.
Investor sentiment toward the financial sector has been shaky since JPMorgan Chase (ticker: JPM) CEO Jamie Dimon warned last month that an economic “hurricane” was coming. Since then, JPMorgan stock has bounced higher despite a bad earnings report, and the Financial Select Sector SPDR exchange-traded fund (XLF), the sector proxy, has behaved surprisingly well. The worst may be yet to come, but so far, the future hasn’t been as bad as feared.
That brings us to a theme we have often championed during the difficult days that have characterized much of 2022.
Investors who can afford to warehouse stocks for three to five years could consider buying the Financial Select ETF, which was recently trading at $32.72. The ETF position can be amplified with the sale of an XLF January $37 call option and January $30 put option to generate about $2 in premiums.
The “strangle” strategy—that is, selling a call and put with strike prices above and below the stock price, but with the same expiration—positions investors to benefit from a 15% rally in the ETF or to buy it at $30 or lower. During the past 52 weeks, the ETF has ranged from $30.37 to $41.70.
The great risk to the strategy—at least in the near term—is if the Federal Reserve’s rate-hiking plans push the economy into a recession. If that happens, few people will feel great about owning bank stocks, or anything else. The Fed is expected to raise rates by 75 basis points on July 27. (A basis point is 1/100th of a percentage point.)
It’s hard for most people to be comfortable being uncomfortable—especially when it involves money. But one of the hallmarks of successful investing is to have a reasonably high pain threshold.
In 2016, when JPMorgan stock was down some 20% and about as popular as Covid is now, Dimon paid about $25 million for 500,000 shares at about $53 each. He has since more than doubled his money. There is no guarantee that what happened to Dimon will happen to you, but “buying fear” tends to be a timeless strategy.
Time will tell if consumers are delusional or if the Street doth protest too much
Moreover, everywhere one turns, people seem to be keeping calm and carrying on, despite Wall Street’s fears that an economic hurricane is coming.
Bank of America (BAC), the nation’s second-largest bank, recently revealed after reporting earnings that its customers are holding up well despite the pressures. They are spending more on travel and entertainment and less on goods. Default rates are low, and people are paying their debts, said Brian Moynihan, the bank’s CEO.
Indeed, people are traveling so much that the airlines cannot deal with the demand. Restaurants are busy. Grocery bills are elevated, as are gas prices, yet most bellies are full and the roads are crowded. Even the strength of the dollar is being taken in stride. Just ask anyone who is visiting Europe and taking advantage of the favorable exchange rate.
Time will tell if consumers are delusional or if the Street doth protest too much because traders and bankers are facing tougher times. The strangle strategy detailed here provides a way to deal with that uncertainty, provided an investor has time and an appetite for volatility.