bank stocks to buy now
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Three Stocks to Buy Now
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Stocks to Buy Now, or Just Another Fad?
After being one of the hot stocks to buy a few years ago, Lululemon Athletica (Nasdaq: LULU) has hit a rough patch.
The company this week had to recall yoga pants made with fabric known as Luon because it was overly transparent - meaning Lululemon customers were walking around with see-through pants.
The products make up about 17% of all "bottoms' sold by the company. According to The New York Times, the recall is expected to account for about $60 million in lost sales.
Lululemon investors saw the stock take a 10% hit this week after the pants debacle.
And now, with some of its most popular products off shelves, the company has opened up the window for another "trendy" fitness chain to play to pantsless consumers.
That's one of the dangers of investing in a fad stock - it's not going to be popular forever.
And even though Lululemon's shares have soared more than 340% in five years - beating returns of both Apple and Google - its success isn't based on solid company fundamentals, but on trends and investor hype.
Here are a couple other "fad" stocks that might not be able to deliver for investors on consumer enthusiasm alone.
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Stocks to Buy Now Ahead of Major Bank Industry Takeovers
There has been a lot of discussion among investors over the past few years about whether the banking industry offers any quality stocks to buy now.
The big banks brought the economy to its knees in 2008 and had to be bailed out by the federal government with taxpayer dollars. The disastrous decisions at large banks spilled over to the smaller banks and caused severe economic distress for many of them.
Many banks were forced to close with 140 banks failing in 2009 and another 157 in 2011.
Although the numbers have tapered off some we still saw more than 50 banks fail last year as a result of residual problems from the housing boom and ensuing credit crisis. This type of carnage is reflected in the price of many small banks, which are just now starting to see their balance sheets and stock price show signs of improvement.
We now face an environment much like the aftermath of the savings & loan debacle in the late 1980s and early 1990s.
You see, during the economic boom from 2001 to 2007 many new banks opened across the United Sates to take advantage of the cheap money from the Fed and the high demand for housing and home equity loans.
Now in the aftermath of the implosion of housing prices, we find ourselves with too many banks even after all the failures. We have seen some bank mergers in 2012 but this is just the start of what will be a massive wave of bank and thrift consolidation activity.
While we have seen some economic recovery, we continue to operate in a better but not good economy. Loan demand is still fairly tepid and is well below pre-crisis levels. It is difficult for many banks to gain market share and maintain profitability.
As we enter 2013 banks face new regulation and compliance costs that may further crimp operating profits. Smaller banks in particular are experiencing high levels of frustration at their inability to remain profitable and grow their franchise. Shareholders are unhappy after several years of poor share-price performance and want to see a return on their investment.
For many the best path is going to seek a suitor and sell out to a larger competitor.
For investors this creates an enormous opportunity for long-term profits, if you know the right stocks to buy now.
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The Banks Win, Again
Finally, some well-deserved help for beleaguered monster banks is on its way.
Make that, well on its way.
Those poor big banks accidently and inadvertently got caught up making so many easy loans to deserving, hard-up borrowers, who wanted to buy overpriced dream homes, and a few million other folks who deserved two homes and McMansions to keep up with the Joneses (you know the Joneses... most of them were "friends of Angelo").
But now, at last, the banks are making profits again.
After suffering the indignity of insolvency and near collapse for all their hard work, the New Samaritans are still being haunted by their generosity, as regulators hound them into settlement submission, merely for doing God's work.
So, what's the good news?
The second quarter may be a good one for the three biggest servicer banks, namely Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), and - the little bank that could, run by that kid named Jamie - JPMorgan Chase (NYSE:JPM).
What's strange is that these do-gooders are being helped by some of the same government folks who are still attacking them in public venues where voters hang their hats.
What's not strange is that tons of underwater homebuyers, who are drowning in debt on dwellings whose prices have fallen 30% to 40%, aren't blaming banks and are running to their rescue.
Okay, maybe they're not running, maybe it's more that they're being corralled, like sheep. But either way, they are helping banks fatten their profits pools (make that bonus pools) again.
They're repaying the banks' favor of giving them loans in the first place by coming (more like being forced) back to the banks to get refinanced on better terms.
But they're not doing it on their own. The banks have a partner helping to round up their old customers and corral them into the breeding profits barn.
That Partner is HARP 2.0
The original Home Affordable Refinance Program, which was launched in April 2009, failed miserably (because there was nothing in it for banks). But the powers that be (the banks... DUH) harped for a new HARP, and they got it last November.
The new program is known as HARP 2.0 (that's because it's twice as profitable for the big banks that sunk the economy and the world under Housing Bubblemania 1.0).
Okay, enough sarcasm; let me slice and dice this succinctly for you.
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