Buckingham Banks on Washington

10/23/2002 12:00 am EST

Focus:

John Buckingham

Editor, The Prudent Speculator

Although The Prudent Speculator features coverage of a wide variety of stocks, editor John Buckingham offers one stock of the month for those interested in a single investment idea. Says the advisor, “For those buying our stock of the month picks, we recommend utilizing a system of dollar-cost averaging, allocating a fixed amount of money each month. This has proven to be an excellent strategy to counteract market fluctuations." Here’s the latest stock to “bank” on.

“We have selected Washington Mutual (WM NYSE) as our stock of the month. The firm is a national financial services Company that provides a diversified line of products and services to consumers and small- to mid-sized businesses. The bank operates more than 2,500 offices throughout the country and as of year end 2001 was the seventh largest banking company in the US.

“Washington Mutual has been firing on all cylinders of late. For the second quarter ended June 30, earnings per share grew 11%. Loan volume increased 34%, year over year, and non-performing assets declined by $152 million from the previous quarter. Washington Mutual has done a good job of navigating through the mine field of record mortgage prepayments (although thrift rival Asotoria Financial’s recent earnings warning has caused us to trim our valuation measures). Still, WM trades for just eight times earnings and 1.6 times book value, while yielding 3.25%. This makes the stock a bargain in our book at prices below $33.86.”

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