Big or small, national or regional, financial stocks have been smacked in the wake of recent bank failures.
It’s been painful for investors.
The three biggest banks in the U.S. – JPMorgan Chase (JPM), Citigoup (C), and Bank of America (BAC) – are down an average of 15% in just two weeks.
And they’re the “lucky” ones. Regional banks have been decimated. First Republic Bank (FRC), Pacific West Bancorp (PACW), and Western Alliance Bancorp (WAL) are down a gut-wrenching 69% on average.
I don’t own these and don’t recommend them, as they do not rate well in my Quantum Edge system. I feel bad for investors who do own these stocks.
Let me reiterate that I realize bank failures are scary. Investors everywhere got nervous this would become a “contagion” that ripped through the banking system and tore at the fabric of our economy. I was not particularly worried, and I’m still not.
The Fed stepped in to ensure that all depositors would get their money back, but the fact that a few cracks in the system even appeared put the central bank on notice. If Fed governors keep raising rates, the problem could become more widespread.
I am extremely confident they will not. The Fed threw everything it could at the financial crisis in 2008 and the COVID crisis in 2020 to save the banking system and the economy. It is not going to let all that work over the last 15 years go to hell and let everything break.
The takeaway is what I’ve been saying for a while – we are much closer to the end than the beginning of rate hikes. Whether we are literally done with increases or we see a small one on Wednesday, a less-aggressive Fed will be good for the economy and for stocks.
And believe it or not, there are some financial stocks out there that actually look pretty attractive.
Finance + Tech = Strength
As you may know, my Quantum Edge system analyzes over a million data points each day to rate stocks based on their fundamentals, technicals, and Big Money flow. More than 6,000 stocks receive a Quantum Score between 0 and 100 that measures their health and their potential.
Those big banks and regional banks I mentioned above did and do rate average to poor in my system. Three have Quantum Scores are in the 30s, with Western Alliance and Citigroup slightly higher at 45, and JPMorgan the highest at 52. The fundamentals of all six rate in the 50s, which is not bottom of the barrel but also not strong enough to interest me as an investor.
But there are always diamonds in the rough, and it’s even better when you can buy those diamonds at a discount.
One financial diamond in the rough is Fiserve (FISV), which is a “fintech” company, short for financial technology. That makes sense because my system also ranks sector strength, and Technology has been the strongest over the last week and the second-strongest sector for all of 2023.
Fiserve is a payment processor. Companies’ descriptions of themselves are often a waste of time, but this one is pretty good: Fiserv enables money movement for thousands of financial institutions and millions of people and businesses – for a world that never powers down.
It’s a huge and growing company with 1.4 billion accounts around the world, nearly 6 million merchant locations, and 10,000 financial institutions as clients. It processes an amazing 12,000 financial transactions… per second. (Or 43.2 million per hour, which is crazy.)
Let’s run FISV through our quantum system and see how it checks out:
Overall Quantum Score: 72.4. This is very attractive. Scores in the 70s are usually the sweet spot of very strong but not overheated.
Fundamental Score: 70.8. Solid earnings and sales growth, strong profit margins, good valuation. The only fly in the ointment is somewhat high debt, but that’s often a fact of life for financial and technology companies.
Technical Score: 73.5. This is strong under any circumstances,but especially after FISV’s recent 8% pullback – which is a heckuva lot better than the wipeouts we talked about above. Outside of that short-term negative, FISV shares are still up near short- and long-term highs, above long-term moving averages, and other technicals rate good to strong.
Big Money Flow: Our smart tech system has detected five Big Money buy signals already in 2023 (the green lines below). It’s also worth noting that there have been no Big Money sell signals since last summer, even amid market choppiness and the current pressure on financials.
I would add that FISV’s 72.4 Quantum Score is much higher than its competitors:
- PayPal (PYPL): 48.3
- Global Payments (GPN): 39.7
- Jack Henry (JKHY): 41.4
- FleetCor Technologies (FLT): 48.3
Fiserve has the makings of an opportunity if you’re looking to add a financially related stock. The tech component strengthens the growth and the opportunity significantly.
Talk soon,
Jason Bodner
Editor, Quantum Edge Pro
P.S. I don’t currently recommend FISV in my investing services, though I have recommended several tech-related stocks recently given the strength I’m seeing in that sector.
In fact, the first two picks in my brand new Quantum Edge Trader service are tech related. One is a company that makes other firms “smart,” and the other is a biotech blockbuster. Both have higher Quantum Scores than FISV.
That’s the advantage of today’s smart technology and the system I created that can analyze the thousands of publicly traded stocks, to help us find those rare “needle in a haystack” opportunities that make investors money.
If you’d like to learn more about the power of our system and receive immediate access to my first two picks, you can click here now.
