With the Federal Reserve having raised interest rates for the first time since 2007, many investors are rotating into banking stocks, many of which stand to benefit from the rising rates by realizing wider net interest margins and higher returns on capital. With many banks also trading at a reasonable price-to-book ratios and yielding attractive dividends, we decided to put a list of banking stocks that billionaires like the most. In this article, we take a closer look at Wells Fargo & Co (NYSE:WFC), Bank of New York Mellon Corp (NYSE:BK), JPMorgan Chase & Co. (NYSE:JPM), Ally Financial Inc (NYSE:ALLY), and Bank of America Corp (NYSE:BAC) and their billionaire holders.
Moreover, we will also examine relevant hedge fund sentiment toward the equities. In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8000 funds in operation at present, Hedge fund experts at Insider Monkey look at the aristocrats of this group, around 730 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 102% since the end of August 2012 and beat the S&P 500 Index by 53 percentage points (see the details here).
#5 Bank of America Corp (NYSE:BAC)
– Number of Billionaire Holders (as of September 30): 9
– Total Value of Billionaire Holdings in the Stock (as of September 30): $1.21 billion
Bank of America Corp (NYSE:BAC) has been range-bound for a long time, having failed to break past the $18 level on several occasions but holding its tangible book value of over $15 a share. Given time, however, many bulls think Bank of America will break past $18 and trade closer to its book value of $22 as the bank’s legacy legal and mortgage costs are wound down and the rising interest rates increase Bank of America’s return on capital. Among the nine billionaires holding shares of BAC is Ken Fisher of Fisher Asset Management.
#4 Ally Financial Inc (NYSE:ALLY)
– Number of Billionaire Holders (as of September 30): 9
– Total Value of Billionaire Holdings in the Stock (as of September 30): $1.46 billion
Mark Palmer of BTIG Research thinks the Federal Reserve’s approval for Ally Financial Inc (NYSE:ALLY) to redeem $1.29 billion of its Series G preferred shares will remove a major overhang and be a potential catalyst that prompts many investors to buy the stock. With shares trading at 0.64 times book value, any positive catalyst is certainly good news. As a bonus, Ally management has also said they are looking to do a share repurchase program and/or pay a dividend in 2016. Billionaire Richard Perry’s Perry Capital owned 22.6 million shares of Ally Financial at the end of September.
