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Bove: 3 Bank 'Buys' Ahead of Earnings

Tuesday, 6 Apr 2010 | 5:27 PM ET

Ahead of earnings, we asked analyst Dick Bove which bank stocks he liked most. Know what he told us?

Okay he did say long Citigroup but he also told us he likes long Goldman Sachs and longBank of New York.

Here's Bove's reasons:

- Citi should be strong in the quarter because their internals are getting better.

- Goldman Sachs is one of the best companies, if not the best company that I’ve ever analyzed. I’m committed to owning that stock.

- For a really cheap bank stock, Bank of New York looks extraordinarily good.

Bove also tells the desk that he's watching the action in the bank ETFs; some have tripled over the past 12 months. That suggests investors expect earnings to get much stronger and investors bid up bank stocks in anticipation of that catalyst.

Early Returns: Financials
Top picks in financials heading into earnings, with Dick Bove, Rochdale Securities.

However, Bove doesn't expect to see the kind of strength that would justify a 3-fold increase in the about-to-be released earnings reports.

"Are investors who are buying bank stocks so aggressively expecting disappointing eanrings in the first quarter?" Bove asks.

Maybe not.

As a result he suggests some short ideas - and playing them in pairs.

"If I bought Citi I would sell Wells Fargo," says Bove. If I bought Goldman I might ease up on Morgan Stanley. And if I bought Bank of New York I'd back away from Northern Trust."



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