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January 14, 5:00 pm EST Meaningful fourth quarter earnings kick off this week with the big banks. We heard from Citigroup this morning. They beat on earnings but on lower than expected revenues. The stock finished UP over 4%. We get JPMorgan and Wells Fargo Q4 earnings tomorrow before the open. Bank of America and Goldman Sachs will report on Wednesday. Remember, the turning point for stocks in December started with a call-out to the major banks by the U.S. Treasury Secretary. Not surprisingly, the turn in stocks was led by the banks. |
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You can see the big reversal in this chart of the KBW bank index. The index is now up 16% since December 26th. With the above in mind, one of the best value investors of the past twenty years, Jeffrey Ubben, has thought the timing is finally right for major banks. He has said the U.S. banking system has the lowest risk profile “than any time in our investing lifetime.” In our Billionaire’s Portfolio, we followed him into Citigroup, the highest conviction position in his $16 billion portfolio. It’s the cheapest of the four biggest U.S.-based global money center banks. As for earnings, overall: Remember, we’re coming off of three consecutive quarters of corporate earnings that blew away very lofty Wall Street estimates — 20%+ yoy earnings growth for the first three quarters of 2018. But sliding stocks in the fourth quarter eroded sentiment, and down came earnings estimates for Q4. The market is looking for just 10% earnings growth for the fourth quarter. For 2019, they’re looking for just 7%. This all sets up for positive surprises. Positive surprises are fuel for stocks.
Join me here to get my curated portfolio of 20 stocks that I think can do multiples of what broader stocks do, coming out of this market correction environment.
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