While hedge funds may be
front-running earnings reports , it’s not
a great idea for the retail investor — especially not
when it comes to bank earnings, David Katz, chief investment
officer for Matrix Asset Advisors, warned.
After
and
came in better-than-expected,
investors are wondering whether other big-name banks will
follow suit.
Even if they do, investors shouldn’t bet on a share
price pop, Katz said.
“The market has been schizophrenic. For the last two to
three quarters, regardless of earnings beats, bank stocks
have either traded lower, or not really had an uptick,”
Katz told CNBC’s
“Squawk
on the Street.”
The latest examples of this “schizo” market came in just last Friday: Wells Fargo reported a in the second quarter on strong mortgage banking income — but shares wavered on the news and edged down in Monday morning trading.
Separately, JPMorgan Chase’s — losing $4.4 billion in the second quarter, followed immediately by a 6 percent share price jump on Friday — almost defied logic. Whether the cause was short-covering, or other factors, the move surprised the Street.
By comparison, seem straightforward, and here Katz breaks down what they mean for the sector.
“Citi did a very good job on the expense side, but the capital markets business (allocations to stocks and bonds) was weak. That’s going to be what’s going on with a lot of the banks,” said Katz. “But they're finally going to be getting help from the mortgage business, which is picking up. You saw that with Wells Fargo.”
Katz said bank earnings are still too much of a
“mixed bag” to call ahead of time, and said
investors would be safer to get in “after the
fact” — when share prices should better reflect
earnings.
We’ll soon find out if he’s right: Quarterly
earnings reports from Goldman Sachs, Bank of America, and
Morgan Stanleywill be announced this week.
The takeaway? Buy banks at your own risk.
“It’s going to be a treacherous earnings
season,” he concluded. “We don’t have a lot
of high expectations for the upcoming quarter.”
—By CNBC.com’s Jennifer Leigh Parker
Additional Views: Big Bank Earnings Will Have Us Cringing:
Bove
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Disclosures:
David Katz personally owns shares in Morgan
Stanley, Wells Fargo, and JPMorgan. Matrix Asset Advisors
also currently holds positions in these stocks. Neither Katz
or his firm invests in Citigroup, Bank of America, or Goldman
Sachs.
Disclaimer
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Follow Jennifer Leigh Parker on Twitter @jparker741 .