Editor’s note: This article was first published in April 2011. All market data are from that month: Popular, Sabadell and Bankinter trading at 0.8 times book value, Popular’s 10% revenue exposure to real estate and construction, 2009-2010 growth, Santander’s branch cost-cutting plans and pending government reforms.
The most profitable stocks on the horizon come from the banks. For those who missed the rise in renewable energy stocks driven by the search for alternative energy sources, we now have the opportunity to get into a sector in the middle of restructuring. That said, we will need to work out which stocks we want for the long term and which for the short term.
Once again we single out Banco Popular as a profitable investment opportunity, since its latest annual results show that it is the best-capitalized listed bank on the stock market. Although she did not explain its future business model, Carmen Ortiz, head of shareholder relations at Banco Popular, said the bank will focus on creating value for shareholders.
In a statement, Banco Popular showed that only 10% of its revenue is linked to real estate or construction activities and that 85% of that exposure is up to date with payments. These figures, together with its growth between 2009 and 2010, mean that Banco Popular could be a very profitable long-term investment.
On the other hand, there are other smaller banks such as Sabadell and Bankinter which, like Popular, trade at 0.8 times their book value.
Banco Santander is the other long-term option, and it is expected to increase its profits through the measures it plans to adopt to cut spending on its branches. These measures have drawn some criticism, although shareholders welcome them.
Remember that the banking sector carries a risk: right now, banks depend on the government actually carrying out its reforms.
See also: 5 tips to improve your personal finances
With bank stocks falling as of today, they certainly leave us in a good position to buy into the stock (once again).
Further reading
Featured image: Javierme Javier Mediavilla Ezquibela, CC BY 3.0, via Wikimedia Commons.
