In this article, we will take a look at Jim Cramer’s top 10 bank stock picks this year. To see more such companies, go directly to Jim Cramer’s Top 5 Bank Stock Picks This Year.
Earlier this year, in a program on CNBC, Jim Cramer made an interesting comparison between Cathie Wood’s ARK ETF and BlackRock. Cramer said that Cathie Wood, who was the best stock picker of 2020, went with growth stocks and innovation in 2020 and won big time. But in 2021 and 2022, her hedge fund did not perform well. What was the reason behind this? Cramer said that Cathie Wood was not diversified. She went with growth stocks in 2020 and outperformed the market because at that time interest rates were low and the market was buying growth stocks. Cramer said that Cathie Wood’s strategy of buying growth stocks was not a “strategy,” it was a “tactic.”
Cramer also emphasized the importance of diversification and said that if you are not diversified enough, you have to be right all the time and that is extremely difficult in the current market environment.
Cramer also said that Cathie Wood dumped Nvidia stock when it was about to take off. According to Cramer, Nvidia was not just another stock that checks the AI box but it was “the AI stock.” Jim Cramer also said that all of this shows Cathie Wood does not follow equities she invests in as closely as he’d thought.
Jim Cramer also talked about some top stocks in Cathie Wood’s portfolio. Some of these stocks have been performing well in 2023 (and Cramer acknowledged that.) But he said that Cathie Wood’s style of investing is not sustainable. He gave the example of Zoom, which Cathie Wood has been holding since COVID days. Cramer wondered why Wood did not realize that Zoom had lost its peculiar touch amid competition from other companies like Microsoft.
Cramer then drew a contrast between Cathie Wood’s investment style and that of Laurence D. Fink, the CEO of BlackRock. What Cramer likes about BlackRock is its massive focus on diversification. Cramer said that Fink is not a “tactician” but rather a strategist.
Bank Stocks on Analysts’ Radar
Major banks in the US have started to report third quarter earnings and analysts are eager to read the numbers to make sense of the country’s economic trajectory. While initial bank earnings have been strong, some analysts believe numbers from major banks do not represent the US consumer sentiment. A report from Bloomberg quoted said Bob Doll, of Crossmark Global Investments, who said:
“Bank earnings are probably a little less useful than usual.”
The report said that major banks like Bank of America and JPMorgan are now lending to only financially sound customers with almost perfect credit scores. Analysts will be keenly watching earnings from smaller banks and regional players who cater to low-income population, small businesses and average US customers.
Our Methodology
For this article we saw several programs of Jim Cramer and picked bank stocks he’s been bullish on. Cramer was eager to watch earnings from some of these banks since he was excited about their fundamentals. Some top names in the list include JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC).
Jim Cramer’s Top 10 Bank Stock Picks This Year
10. KeyCorp (NYSE:KEY)
Number of Hedge Fund Holders: 49
Jim Cramer recently said that KeyCorp (NYSE:KEY) was one of the banking stocks that investors should pay attention to. Cramer named the CEO of KeyCorp (NYSE:KEY) and said “he’s very talented.” Cramer also highlighted KeyCorp (NYSE:KEY)’s high dividend yield (over 7%). Cramer said that KeyCorp (NYSE:KEY) is a conservative bank in a growth area.
KeyCorp (NYSE:KEY) indeed delivered. KeyCorp (NYSE:KEY) posted third quarter results on October 19, beating both EPS and revenue estimates. GAAP EPS in the period came in at $0.29 beating estimates by $0.02. Revenue in the quarter fell about 16.9% year over year to $1.57 billion, beating estimates by $10 million.
9. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 42
Earlier this year Jim Cramer talked about some bank stocks and told viewers he wanted them “in” these stocks. U.S. Bancorp (NYSE:USB) was one of these stocks. Cramer said U.S. Bancorp (NYSE:USB) reported a great quarter.
In a Lighting Round on his program, Jim Cramer recently said that U.S. Bancorp (NYSE:USB) is a “terrific bank.” Cramer praised U.S. Bancorp (NYSE:USB)’s dividend yield (6%) and said that the stock “should bottom.”
However, Cramer said that regional banks are so bad that he’s afraid to recommend these stocks lest they fall when they report their numbers.
As of the end of the second quarter of 2023, 42 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in U.S. Bancorp (NYSE:USB). The biggest hedge fund stakeholder of U.S. Bancorp (NYSE:USB) was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $301 million stake in the company.
Mairs & Power Growth Fund made the following comment about U.S. Bancorp (NYSE:USB) in its second quarter 2023 investor letter:
“Notable detractors to performance in the first half were U.S. Bancorp (NYSE:USB), Charles Schwab (SCHW), and UnitedHealth Group (UNH), which were down 22.09%, 31.65%, and 8.65%, respectively. US Bank, based in Minnesota, was caught up in the recent mini crisis in the banking industry. The company recently acquired Union Bank for $8 billion, which hit its capital reserve levels, and the timing was unfortunate given the selloff in the industry following that acquisition. However, we believe US Bank should be able to rebuild its capital reserve over the coming quarters, putting it in a better position to withstand future negative events in the industry.”
8. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 51
Earlier this year, Jim Cramer praised Capital One Financial Corporation (NYSE:COF)’s CEO Richard Fairbank and said he’s surprised at the executive’s ability to challenge even the “deepest of downturns.” Cramer was praising Capital One Financial Corporation (NYSE:COF)’s strong earnings report.
Of the 910 hedge funds in Insider Monkey’s database, 51 hedge funds had stakes in Capital One Financial Corporation (NYSE:COF). The most significant stakeholder of Capital One Financial Corporation (NYSE:COF) was Natixis Global Asset Management’s Harris Associates which owns a $2.1 billion stake in the company. Like Capital One, hedge funds also like JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC).
ClearBridge Value Equity Strategy made the following comment about Capital One Financial Corporation (NYSE:COF) in its first quarter 2023 investor letter:
“We also added Capital One Financial Corporation (NYSE:COF), a largely domestic diversified financial services company with a focus on credit cards that also operates a leading auto lending business. We believe recent regulatory changes such as the Current Expected Credit Losses (CECL) methodology of the U.S. Treasury and the ability of credit card companies to manage credit risks have improved the risk profile of leading credit card businesses but have been underappreciated by the market. With its substantial financial reserves, we believe that Capital One is well-positioned to navigate future economic uncertainty. Additionally, we believe this current market and credit cycle is fundamentally different than prior ones due to stronger consumer balance sheets, excess savings, strong wage growth and strong employment environment. As a result, we believe Capital One’s current price has already been overly discounted, and we expect it to offer compelling upside despite further risks of drawdown when a recession emerges.”
7. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 54
Ahead of Morgan Stanley (NYSE:MS)’s Q3 results, which beat both EPS and revenue estimates, Cramer said that Morgan Stanley (NYSE:MS) has become a “horrendous” holding for his charitable trust. Cramer “can’t believe” Morgan Stanley (NYSE:MS) had fallen “this low.” But he was still giving a Buy rating to Morgan Stanley (NYSE:MS) ahead of earnings. Cramer believes Morgan Stanley (NYSE:MS) has “a lot of good businesses” beyond just wealth management.
As of the end of the second quarter of 2023, 54 hedge funds out of the 910 hedge funds tracked by Insider Monkey reported owning stakes in Morgan Stanley (NYSE:MS). The biggest hedge fund stakeholder of Morgan Stanley (NYSE:MS) during this period was Phill Gross and Robert Atchinson’s Adage Capital Management which owns an $111 million stake in the company.
Here is what Madison Dividend Income Fund has to say about Morgan Stanley (NYSE:MS) in its Q3 2022 investor letter:
“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.
Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…”
6. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 70
Jim Cramer in his October 14 program had said that The Goldman Sachs Group, Inc. (NYSE:GS) should post an excellent quarter. He said The Goldman Sachs Group, Inc. (NYSE:GS) is in a transitory process of getting rid of businesses that are not aligned with it. Cramer said that The Goldman Sachs Group, Inc. (NYSE:GS) wants to become the “key depository of the wealthy people of the world.”
The Goldman Sachs Group, Inc. (NYSE:GS) on October 17 posted fiscal third quarter results. GAAP EPS in the quarter came in at $5.47 missing estimates by $0.06. Revenue in the period came in at $11.82 billion, surpassing estimates by $690 million.
A total of 70 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in The Goldman Sachs Group, Inc. (NYSE:GS). The biggest stakeholder of The Goldman Sachs Group, Inc. (NYSE:GS) was Boykin Curry’s Eagle Capital Management which owns a $905 million stake in the company.
Manole Capital Management made the following comment about The Goldman Sachs Group, Inc. (NYSE:GS) in its Q3 2022 investor letter:
“Back in 2019, The Goldman Sachs Group, Inc. (NYSE:GS) made a splash in the card industry by working with Apple and MasterCard on a credit card. The actual card is fairly sleek (as you can see below), as customers names are etched into an Apple titanium card. The no-fee card generated a lot of hype, as many early users were quick to post their latest card on various social media sites.
The initial goal of Marcus (back in 2016) was to leverage Goldman’s wonderful name brand and build a full-service digital bank. This card was a large piece of GS’s ambitions to grow its retail banking franchise called Marcus. After 5 years, Marcus now has 14 million customers and $16 billion in loan balances. Surprisingly, Marcus now represents nearly 20% of the firm’s total revenue.
We thought it would be interesting to look how the Apple Card is doing in terms of loans and exposures. With over $100 billion in assets, this has been a successful source of cheap deposits for GS. Despite having an institutional / “white shoe” brand in the investment banking and trading world, GS’s Apple Card has been a disappointment.”
Like JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC), Goldman Sachs is one of the top bank stocks on Jim Cramer’s radar.
Click to continue reading and see Jim Cramer’s Top 5 Bank Stock Picks This Year.
Suggested articles:
- 12 Best Upwork Alternatives for Freelancers and Employers
- Top 20 Countries With Most Natural Resources in the World
- 23 High-Paying Trade and Vocational Jobs in 2023
Disclosure: None. Jim Cramer’s Top 10 Bank Stock Picks This Year is originally published on Insider Monkey.
