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Financial Services – Some Fly in Challenged Sector

August 09, 2013 | About:
Sally Jones

Sally Jones

49 followers
This year the financial sector is contending with many challenges, including hundreds of new regulatory rules from the Dodd-Frank reform and a fresh wave of cyber attacks. According to a report from The Agari Trust Index, email phishing attacks on financial sector companies are up 122% in the last three months. In a nutshell, the Dodd-Frank legislation was created to “promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”

Deloitte’s sector outlook for 2013 says the banking industry must move forward in the age of re-regulation, and for capital markets, “It’s the end of the world as we know it.” According to Jocelyn Cunningham, principal at Deloitte Consulting LLP, “The biggest issue for the entire industry has to do with figuring out what it will look like in the future, because the traditional business model has changed due to regulation, but at the grass roots level, there is likely no margin left in this business anymore.”

With a few financial companies soaring high above a wobbly economic world, two regional banks that have received major recognition are up over 12 months, as well one insurance company. Using the GuruFocus Buffett-Munger Screener, here’s a look at three companies that show high predictability and yield in a fragmented sector.

SECTOR WATCH: Financial Services

Camden National Corporation (CAC) – 4 Star Predictability - Yield 2.70%

EBITDA 12-Month Growth Rate: -8.8%

Recognized by Forbes as one of “America’s Most Trustworthy Companies” in 2012 and 2013, Camden National Corporation is a holding company employing more than 500 Maine residents for two financial services companies including Camden National Bank and the wealth management company, Acadia Trust N.A.

Camden National Corporation (CAC) is up 11% over 12 months. The company has a market cap of $294.6 million; its shares trade at around $38.75 with a P/E ratio of 13.30 and P/S ratio of 1.30.

Historical pricing:

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Camden National reported net income for the second quarter of 2013 of $6.3 million and diluted earnings per share of $0.82. The net income results of the second quarter of 2013 represent an increase of $669,000, or 12%, compared to the first three months of 2013. For the second quarter of 2013, the company achieved a return on assets of 0.98%, a return on tangible equity of 13.78% and an efficiency ratio of 60.30%. The company’s balance sheet shows total assets were $2.6 billion as of June 30, 2013, representing a $37.0 million increase since year end. The growth in total assets was primarily due to an increase in loans (excluding loans held for sale), which grew by $38.7 million, according to a company press release.

Guru Action: As of June 30, 2013, Chuck Royce made a new buy of 123,899 shares at an average price of $34.78 for a gain of 11%.

Jim Simons is a long-time shareholder, first buying in the fourth quarter of 2005. Simons has averaged gains of 3% and 25% on shares bought and sold, respectively.



M&T Bank Corp. (MTB) – 4 Star Predictability - Yield 2.40%

EBITDA 12-Month Growth Rate: 43.9%

M&T Bank Corporation was named one of the ten “Best Banks in America” by Money Magazine in 2012.

M&T Bank Corp. (MTB) is up 36% over 12 months. The company has a market cap of $15.24 billion; its shares trade at around $118.13 with a P/E ratio of 12.50 and P/S ratio of 3.40.

Historical pricing:

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Founded in 1969, M&T Bank Corporation, formerly known as First Empire State Corporation, is a bank holding company located in Buffalo, New York.

M&T Bank Corporation had $83 billion in assets as of Dec. 31, 2012, and is one of the 20 largest commercial bank holding companies in the U.S. M&T Bank has over 700 domestic branches and over 2,000 ATMs across Delaware, Maryland, New York, Pennsylvania, Virginia, West Virginia and Washington, D.C.

Guru Action: As of June 30, 2013, Scott Black made a new buy of 75,700 shares at an average price of $103.07 for a gain of 14.6%.

John Hussman also made a new buy of 100,000 shares at an average price of $103.07 for a gain of 14.6% as well.

Mario Gabelli and Ken Fisher reduced MTB in the second quarter. Fisher reduced his position by 40.02%, selling 57,240 shares at an average price of $103.07 for a gain of 14.6%. Fisher has averaged a gain 40% on 286,539 shares bought at an average price of $84.44 per share.

Mario Gabell sold 15,900 shares at an average price of $103.07 for a gain of 14.6%.

Fisher’s trading history:



Aflac Inc. (AFL) – 5 Star Predictability - Yield 2.20%

EBITDA 12-Month Growth Rate: 23.9%

Aflac Inc. (AFL) is up 35% over 12 months. The company has a market cap of $28.73 billion; its shares trade at around $61.78 with a P/E ratio of 9.70 and P/S ratio of 1.10.

Historical pricing:

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Incorporated in 1973, Aflac Inc. is a general business holding company. The company and its subsidiaries sell supplemental health and life insurance in the U.S. and Japan.

Aflac Inc. reported total revenues of $6.0 billion during the second quarter of 2013, compared with $5.9 billion in the second quarter of 2012. Net earnings were $889 million, or $1.90 per diluted share, compared with $483 million, or $1.03 per share, a year ago. Net earnings in the second quarter of 2013 included after-tax realized investment gains, net of realized investment losses, of $130 million, or $.28 per diluted share, compared with net after-tax losses of $272 million, or $.58 per diluted share, a year ago, according to a company press release.

Guru Action: As of June 30, 2013, John Hussman bought 601,500 shares at an average price of $54.24 for a gain of 13.9%. His trading history shows only gains since it first bought in the third quarter of 2011. He holds AFL along with 11 other gurus, three of whom bought new in the first quarter of 2013.



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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 5.0/5 (1 vote)

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