Dear Reader,
Shares of State Street (STT) melted more than 16% Monday as investors yanked assets out of the financial giant and lower fees ate into revenue. Where'd all that money go?
Not my pig, not my problem.
Right now, investors are piling out of regional banks, and it's killing share prices.
The SPDR S&P Regional Banking ETF (KRE) is off 27% to start the year after the 2023 banking crisis hit in mid-March 2023. This crisis has hit a lot of great banks, with solid deposit levels and muted exposure to the commercial real estate market.
In fact, there's one bank that I believe is an absolute Screaming Buy at the moment.
You'll think the same in a moment.
But why would I park a lot of capital and suffer the volatile whims of the market over the next nine to 12 months when I can make money now by actively trading this stock?
I'm going to give you the ticker. I'm going to explain the opportunity.
And I'll show you exactly the type of return I'm expecting in the next 45 days...
If you're looking to make real money on the 2023 banking crisis... start right here.
Cincinnati Banks Rule
If you know me, I'm a big fan of Cincinnati banks. I own TFS Corporation (TFSL), a little-known community banking operator that continues to pay me a strong dividend.
But there's a much more important Cincinnati bank that I need to be trading right now.
That's Fifth Third Bank (FITB).
The stock's trading at a level we haven't seen since the wake of the 2020 COVID crisis, and its dividend is a stunning 5% for a bank of this size. Plus, the P/E ratio is under 8.
And the Fair Value of the stock - according to Guru Focus - sits around $38.00.
It's currently trading around $26.50. That 50% upside is what I expect over 18 to 24 months. But the market might not cooperate with so many concerns around its rivals in the regional banking space.
Yes, I could buy and hold it. And if other banks in the sector have terrible earnings reports, I can watch this stock pull back from $26 to $24 - and have that anger in my voice because I'm down money on paper.
Or I could buy it, hold it, and have it trade sideways for a solid six months - delivering little more than dividend payouts.
That's not going to do.
So, let's take a look at the situation for the next 45 days... and why FITB is in my plans.
Banks are in crisis. That's not going away anytime soon.
But Fifth Third (FITB) has far better risk management practices. It has very little exposure to risky crypto or venture capital assets. And during its earnings report recently, it offered extraordinary transparency into its operations in March 2023. At a time that everyone is panicking about commercial real estate, Fifth Third's exposure is extremely limited.
Commercial mortgages are a paltry 9% of the total loans. And commercial construction - which remains robust in places where it is expanding - is a small part of the portfolio.
That's a major risk that I can cross off my list.
Now, let's look at the balance sheet. The story of March was about bank runs and whether these companies could access enough capital to remain solvent.
Do banks have enough liquidity to weather a storm - whether it's now or in three months?
I don't care about the rest of the sector. I am only focused on FITB.
And FITB is one of the most liquid companies on the planet.
Fifth Third has $206 billion in assets. Through the Fed's Bank Term Funding Program (BTFP), FITB can get funding off the back of $2.7bn U.S. Treasuries, $12.6bn agency residential MBS, and $29.8bn agency commercial MBS. It's fine. It's beautiful. It's what I want to own.
But here is a stock with a fair value of about $31 (and an average price target with at least 50% upside) trading down around $26.50.
So, let me check the one last thing that would give me confidence in this stock...
Company director Gary Heminger bought about $1.27 million in company stock at an average of $26.82 per share in the last month. That's a director with knowledge of the company's future stepping in and buying the stock with his own cash... for MORE than today's value. What an incredible vote of confidence!
Now, should I buy it? Sure, if you want to see dividends and a small upside over the next 45 days.
I love to provide value for you, and I think this is value... but how do I make money off this?
I trade it obviously with the option of owning it and keeping that small upside while capitalizing on the volatility.
What volatility you ask... How about a return that is nearly 300% larger than that dividend?
Today at Flashpoint Trader, I'm going to show investors how they could potentially lock in shares of this stock at a much lower level or generate a monster, double-digit return on FITB shares.
I want to trade this with you, and we are actively going to start today... I want you to be there. Check out how to start RIGHT HERE. Or you can call Gabe and his team at 877-212-9163, and he'll get you the best pricing available.
Today's Momentum Reading
WORLD'S BIGGEST INDICATORS
Broad Market: Green
S&P 500: Green
Recap: The World's Biggest Indicator (Momentum) is Green...
The S&P is having a tough time surpassing the VWAP today, while the Russell 2000 is starting to wobble as market participants process recent bank earnings reports. The battle between bulls and bears is intensifying as they debate the timing of a possible pivot by the Federal Reserve. Investors will keep a close eye on the performance of banks this earnings season following the collapse of Silicon Valley Bank last month, which triggered a cash crunch and sent shockwaves throughout the industry. (Learn the power of reversion trading with me in Hyper Momentum Trader)
Flashpoints I'm Watching
- The New AI Threat: The 2023 Regional Banking Crisis might be a short-term threat to the economy, but the long-term threat to jobs is now Artificial Intelligence. Over the weekend, a new project called Auto-GPT turned heads on GitHub with a dramatic expansion in digital assistance. This iteration can achieve multiple tasks at once. The concept threatens the jobs of not just assistants. This could displace engineers and programmers quickly by making Artificial Intelligence autonomous.
- Will Lending Slow: The focus on earnings will turn to the Federal Reserve later this week. Treasury Secretary Janet Yellen has suggested that tighter financial conditions could drive banks to extend fewer and/or smaller loans in the near-term, effectively accomplishing the central bank's goals. Despite Yellen's statement, the markets still anticipate an 80% probability that the Fed will increase its Funds rate by 25 basis points in May.
- Don't Drop the Ball: Investors should not lose their focus on the 2023 Debt Ceiling crisis. We see an uptick in short-term Treasury bond rates due to the pending standoff in Washington over the U.S. government's debt limit. The Treasury Department is expected to run out of money in June - although a lackluster tax revenue season could weigh on the budget. Congress has kicked this crisis down the road - and it will be on our doorstep soon.
Hot Long Shot
The June 16, 2023 Meta Platforms $285 call is trading under $1.00. There is a massive gap forming between $240 and $280, and if this stock pops higher into earnings and takes off, this could really scream much higher. It's a long shot for a reason. The probability of profit is just 9.1%. But that's what a long shot trade is.
Buy to Open the META $285 call for June 16, 2023 for $1.00 or less.
What You Missed
The US government has announced $13 billion of financing to support America's biggest vulnerability.
Our grids. And this company could take the lion's share.
Per Shah's last conversation with an insider, the founders of this company have agreed to reserve a piece of their shares.
But this is only for investors who act before April 20.
Shares are currently going for just $4.38.
That's a steal.
However, this deal closes on Thursday.
Money Map's Chief Investment Strategist has recorded a full report here. (This information will soon be gone.)
Stay Liquid,
Garrett
The post This Screaming Buy is a Much Better Trade on Monday appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.