In this article, we will take a look at Jim Cramer’s top 5 bank stock picks this year. To see more such companies, go directly to Jim Cramer’s Top 10 Bank Stock Picks This Year.
5. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 73
Jim Cramer recently said that he’d be looking at American Express Company (NYSE:AXP)’s latest quarter earnings. While Cramer acknowledged that an under-pressure consumer in the US amid rising rates and inflation might impact American Express Company (NYSE:AXP) in the short-term, he said the company has “so much going for it” that the stock could be an interesting play.
As of the end of the second quarter of 2023, 73 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in American Express Company (NYSE:AXP). The biggest stakeholder of American Express Company (NYSE:AXP) was Warren Buffett’s Berkshire Hathaway which owns a $26 billion stake in the company.
ClearBridge Large Cap Value Strategy made the following comment about American Express Company (NYSE:AXP) in its Q3 2023 investor letter:
“Other detractors included American Express Company (NYSE:AXP), which fell on concerns over slower consumer spending and rising charge-offs, as well as wireless tower REIT American Tower, which was pressured by the increase in rates along with the broader real estate sector.”
4. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 75
In January this year, Cramer predicted that Wells Fargo & Company (NYSE:WFC) stock was “about to take off.” It’s also his charitable trust’s holding. Cramer at the time said that he’d told his investing club members that Wells Fargo & Company (NYSE:WFC) was about to “blast off.” However, Wells Fargo & Company (NYSE:WFC) has apparently not lived up to Cramer’s expectations, losing about 1% in value year to date through October 20.
Earlier this month, Baird’s David George gave bullish comments on Wells Fargo & Company (NYSE:WFC). The analyst said while Wells Fargo & Company (NYSE:WFC) has not gained much this year, it has done an “okay” job on a YoY basis.
“They had to work out a lot of what I would call non-operational deposits over the last couple years, so that has positioned them as a counterparty of choice on the West Coast,” George said.
Here is what Tweedy, Browne has to say about Wells Fargo & Company (NYSE:WFC) in its Q1 2023 investor letter:
“The Funds received very little in the way of return contributions from many of their financial, energy, media, and healthcare holdings. While it would appear that a crisis was avoided by the quick intervention of bank regulators in the US and Switzerland, some uneasiness still remains in the global banking community. This turmoil couldn’t help but have a negative impact on investor sentiment and in turn on Fund bank holdings such as Wells Fargo (NYSE:WFC).”
3. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 88
Jim Cramer recently called The Charles Schwab Corporation (NYSE:SCHW) a “cheap” stock and said people’s concerns over the company’s balance sheet are “overdone.” Cramer said that these concerns are keeping a lid on The Charles Schwab Corporation (NYSE:SCHW). Cramer was also eager to find out the reasons behind these concerns in the bank’s latest earnings report. The Charles Schwab Corporation (NYSE:SCHW) posted mixed quarterly results. Adjusted EPS in the third quarter came in at $0.77 beating estimates by $0.03. Revenue in the period fell 16.2% year over year to $4.61 billion, meeting estimates.
As of the end of the second quarter of 2023, 88 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in The Charles Schwab Corporation (NYSE:SCHW). The biggest stakeholder of The Charles Schwab Corporation (NYSE:SCHW) was Natixis Global Asset Management’s Harris Associates which owns a $1.1 billion stake in the company.
ClearBridge Large Cap Value Strategy made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its Q2 2023 investor letter:
“We have done so recently with The Charles Schwab Corporation (NYSE:SCHW), which got caught up in investor concerns over regional banks, due to the perception of an asset/liability mismatch on Schwab’s balance sheet. While there are similarities with regional banks, Schwab has minimal credit risk and far higher organic growth than traditional banks. In addition, Schwab’s mostly retail customers are not pulling money out of its ecosystem. On the contrary, the company continues to grow client assets at a mid-single-digit percentage rate despite the banking selloff. Concerned over interest rate risk, we trimmed our position last year and earlier this year. As the stock pulled back this spring, we added back aggressively. It remains an exceptionally strong franchise in terms of asset gathering and customer loyalty and runs a unique business model that continues to attract client assets; we are pleased to have the opportunity to express our differentiated view.”
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 90
Jim Cramer has long been bullish on Bank of America Corporation (NYSE:BAC). Last year, Cramer praised Bank of America Corporation (NYSE:BAC)’s huge spending on IT and said that Bank of America is benefitting from rising interest rates and making more money because of more people keeping money in banks. Last year Cramer had also said that Bank of America Corporation (NYSE:BAC) stock was not expensive and also praised the company’s management.
Cramer had said that Bank of America Corporation (NYSE:BAC) stock could “pop” if it’s anywhere near as good as Wells Fargo and JPMorgan. Bank of America Corporation (NYSE:BAC) indeed posted strong quarterly results earlier this month. GAAP EPS in the third quarter came in at $0.90 beating estimates by $0.08. Revenue in the period jumped 2.9% year over year to $25.2 billion, surpassing estimates by $130 million.
Diamond Hill Select Strategy made the following comment about Bank of America Corporation (NYSE:BAC) in its Q2 2023 investor letter:
“Other bottom contributors included SunOpta, Bank of America Corporation (NYSE:BAC) and Texas Instruments. Bank of America (which we added to the portfolio in Q2) is among the US’s largest banks. Shares were pressured during the quarter against a still-challenging backdrop for banks, particularly as investors fret about rising deposit costs and the values of some longer-duration assets in a rising-rates environment.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 106
In January this year Jim Cramer said that “after all” JPMorgan Chase & Co. (NYSE:JPM) was “still cheap.” Earlier this year, when asked whether JPMorgan Chase & Co. (NYSE:JPM) hitting 52-week high makes sense, Jim Cramer said JPMorgan Chase & Co. (NYSE:JPM)’s surge was justified since the bank got a great deal (its First Republic acquisition), in addition to having a “fantastic client base”
Out of the 910 hedge funds tracked by Insider Monkey, 106 hedge funds reported owning stakes in JPMorgan Chase & Co. (NYSE:JPM). The biggest stakeholder of JPMorgan Chase & Co. (NYSE:JPM) during this period was Edgar Wachenheim’s Greenhaven Associates which owns a $699 million stake in the company.
In its Q3 earnings call, JPMorgan Chase & Co. (NYSE:JPM) talked about guidance and future expectations. JPMorgan Chase & Co. (NYSE:JPM) said:
“We now expect 2023 NII and NII ex-Markets to be approximately $88.5 billion and $89 billion, respectively, with the increase driven by slower reprice than previously assumed. Consistent with what we’ve been saying throughout the year, while we don’t know when it will normalize, we do not consider this level of NII to be sustainable. Our outlook for 2023 adjusted expense is now approximately $84 billion.
And as a reminder, this is on an adjusted basis, which excludes legal expense. Also, remember, this outlook excludes the pending FDIC special assessment. And on Credit, we now expect the 2023 Card net charge-off rate to be approximately 2.5%, mostly driven by denominator effects due to recent balanced growth. So to wrap up, we’re pleased with another quarter of strong operating results. Throughout the year, we’ve been pointing out the various sources of significant uncertainty in all of those, including the geopolitical situation, economic outlook, rate environment, deposit reprice and the impact of the Basel III endgame proposal are as prominent now as they have been in the recent past. But as always, we continue to prepare for a range of scenarios and are focused on being there for our clients and customers when they need us most.”
Read the full earnings call transcript here.
Patient Capital Opportunity Equity Strategy made the following comment about JPMorgan Chase & Co. (NYSE:JPM) in its Q2 2023 investor letter:
“Many technicians and quantitative strategists expect growth stocks to continue to outperform. There’s a good shot that’s right but longer term, we remain more optimistic on classic value. People remain enamored with growth investing. Value stocks trade at a discount to historical valuations unlike growth stocks, which trade at a premium. Take two high quality stocks as an example, Costco (“growth”) vs. JPMorgan Chase & Co. (NYSE:JPM) (“value”).
JPMorgan (JPM) has also posted excellent performance. It was profitable even during the financial crisis. Since Jamie Dimon took the reins in 2005, it’s grown earnings per share 11% per year (almost exactly the same rate as Costco over the same period). The stock’s annualized gains of roughly the same rate. Its P/E ratio has fallen from 12x in 2005 to 10x today. It guides for a normalized 17% return on tangible capital but earned 23% in the most recent quarter…”
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