Bank shares lead the market higher, not too late to buy
CNBCs Jim Cramer says the stock market's recent boost of its downsides is attributable to a key sector: the banks.
" When you see At this incredible nine-day race in the financial stocks, there is really only one way to interpret it: the banks are leading this market out of the bear's abyss, he says Wednesday on "Mad Money" after investment giant Goldman Sachs & # 39; the shares were put out their best trading day within 10 years.
The surplus was partly off strong better than expected earnings reports from Goldman Sachs and Bank of America, and partly from the "severe" sales that hit bank deposits in the fourth quarter of 201[ads1]8, Cramer said.
In the short but evil bear market, the group saw a sharp decline, the most dramatic being the Goldman's drop from $ 234 at November height to $ 151 at the downturn. The drop was probably exacerbated by a scandal in Malaysia, which Goldman's CEO spoke on Wednesday. Even after its 9.54 percent increase on Wednesday, Goldman shares traded at just $ 197.08.
To Cramer, this action is symbolic of what investors are just beginning to understand.
"Investors believe I have begun to realize that banks are literally – not figuratively but literally – making more money than ever, and doing so with less risk and fewer employees, as technology has replaced tons of white collar jobs, "he said.
As such, "it's not too late to buy the banks," claims Cramer.
What makes him so sure? First, based on concrete book value, his favorite values for valuing the big banks, a stock trades like Goldman, with an extreme discount, he said. Material book value refers to how much a bank would be worth if it knocked down and completely liquidated its business.
"Goldman's actual book value is $ 196 per share, just an amount below which the stock is currently trading," Cramer said. "It's absurd. They make a fortune out of that book value, but they get almost no credit for it at all."
Bank of America, which has 26 million active users on its mobile app, can't get the credit it deserves, either, he said. Cramer claimed that the Bank of America with 1.5 billion app login in the fourth quarter alone goes beyond being "millennials bank" because everyone with a smartphone is a potential digital customer.
"As I see it, this is a growth company that only masquerading as a staid and boring bank, he said.
The host" Mad Money "added that he has not seen action this" absurd "and disconnected the reality of bank shares for decades.
"Frankly, we haven't seen a moment like this – where banks make much more money than people think – since we got out of the war in the 1950s," he said. investors invest these stocks for what seemed like a big bottom-up, just to realize not long after the new buyers flock to the group after months and months of underperformance. "
These new buyers, Cramer said," recognized that something fundamentally had changed oneself: the banks had improved. The bank banks eventually increased to new heights, and I wouldn't be surprised if we got a similar scenario this time around. "
And if the financial sector, which represents about 20 percent of the S&P 500, can get the track back, it could broader stock market see "some notable gains," Cramer said.
"There will be many people who say," Finally, I'm back to myself, time to go. & # 39; I urge you to to think the other way, "he told investors. "There are many investors who want to look at these races and decide … they want in, and honestly I think they make the right conversation, not the exiters, though, ideally, you will have to get ahead of those latecomers. "