Voice of Cramerica

Buy the Fortress Four Banks?

I can already tell that the Four Fortress Banks Jim highlighted on Monday will be one of those groups that we constantly revisit for at least the next several months. 

Like the Four Horsemen of Tech that Jim anointed a little more than a year ago, I predict that these banks -- Wells Fargo, US Bancorp, Bank of America, and JPMorgan Chase -- will get a lot of play on air, at least until, again like the Four Horsemen of Tech, Jim feels that their stocks have become played out.

In my very first Voice of Cramerica post, I wrote about how themes matter more to us than stocks. The themes Jim repeats the most are the ones he has the strongest conviction in.  
But sometimes stocks can be a theme in and of themselves, and that's the case with the Fortress Four. Even though we've turned on a dime, from being pretty pessimistic about the financials, although we always acknowledged that something could go right and turn things around, to being much more optimistic about the group in general, Jim hasn't said it's time to start buying any of them, other than US Bancorp on Monday night because it alone of the Fortress Four had pulled back on weakness, and Wachovia on account of its great CEO, Bob Steel.

How can Jim go from negative to positive on the group without telling you to buy more than just two stocks? First, because of the recent enormous rally in the banks, the prices for most of them are too high, so high that on Monday night Jim even said that three of the Fortress Four were too expensive. Last night Jim talked about the opportunity you had to be a buyer of JP Morgan at a good price, one of the Four Fortresses, after American Express reported its lousy quarter after the close on Monday, knocking down the banks indiscriminately, but only for a brief period before they went on to recover and then rally. We gave you the Fortress Four even though Jim thought only one of them was cheap enough to buy at the time so that when weakness presents itself, however briefly, like it did yesterday morning, you'll know what to do.

Second, Jim may have become more optimistic about the banks, but he's said he still thinks that some of the weaker regional banks could pull an IndyMac and go under. In fact, part of the premise behind the Fortress Four is that they're different from other financials. Don't think for a minute that we like all the banks and these four are just our special favorites. I said these four banks were a theme in and of themselves and that wasn't just flowery language. Jim picked these four banks because he thinks they're the only ones with enough capital (or ability to raise capital) to acquire the good assets of doomed weaker banks. The government doesn't want the weak banks to go under, something that could do a number on our already battered economy, so the feds might need the Fortress Four to buy the weaker banks and keep them running. Jim explained this part of the thesis in plenty of detail on Monday night, so I won't cover any more old ground.

The point, however, is that the Four Fortress Banks aren't a proxy for the banking industry; they're just the opposite, companies that we think should ultimately benefit from the problems plaguing weaker banks. The Four Fortress Banks are predators, or cannibals if you like, and if Jim is right about them, they'll get fat preying on wounded and bleeding financials.

Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Rich and Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like. 

Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.

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