Six Big Banking Stocks Trading 25% Below Their Graham Number

07/17/2014 7:00 am EST


Since big banking stocks have reported great earnings so far this season, the staff at decided to start looking for a few undervalued plays.

Big banking stocks went through the roof on Tuesday morning with JP Morgan (JPM), Mastercard (MA), and Bank of New York (BK) all gaining at least 2%, as of 10:10 EST. 

Many are attributing the renewed enthusiasm for big banking stocks to the suprising earnings from Goldman Sachs (GS), where net income handily beat all estimates. 

As firms contended with shutting down their trading desks and increasingly large fines from the Justice Department, investors were skeptical about the sector. Goldman Sachs was the worst performer on the Dow so far this year. 

With that in mind, we decided to screen for undervalued big banking stocks, in case investors are still overly bearish on the sector. To do that, we decided to screen all US financial institutions with a market cap of $10 billion or more. 

We then screened that list of 70 firms for stocks trading below their Graham number. Named for pioneer value investor Benjamin Graham, who wrote the book on security analysis, the Graham number is a fair value of the stock based on earnings and book value. 

A number of stocks in the sector appear to still be undervalued by this metric, so we set the screen very high, only including stocks trading at least 25% below their Graham number. This indicates that there is still a large incongruity between the company's size and earnings, and the price people are willing to pay for shares. 

Do you think big banking stocks will continue to outperform? Use the list below to begin your analysis. 

Click on the interactive chart to view data over time. 

Click to Enlarge

1. JPMorgan Chase & Co. (JPM): Provides various financial services worldwide. Market cap at $218.31B, most recent closing price at $58.03.

2. The Goldman Sachs Group, Inc. (GS): Provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Market cap at $77.79B, most recent closing price at $166.54.

3. PNC Financial Services Group Inc. (PNC): Operates as a diversified financial services company. Market cap at $43.11B, most recent closing price at $81.34.

4. Capital One Financial Corp. (COF): Operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services in the United States, Canada, and the United Kingdom. Market cap at $41.13B, most recent closing price at $71.73.

5. Regions Financial Corp. (RF): Operates as the holding company for the Regions Bank that provides a range of commercial, retail, and mortgage banking services in the United States. Market cap at $14.39B, most recent closing price at $10.44.

6. The Travelers Companies, Inc. (TRV): Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Market cap at $29.96B, most recent closing price at $83.44.

By the Staff of

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