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How to Play the Stress-Test News

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    Matt McCormick of Bahl & Gaynor Investment Counsel on where to invest in the financial sector.

  • Duration 5:22
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You very much.

Everybody we have a -- For -- right now our investors take in a bit of their bank exposure off the table.

Financials -- session highs at this hour after the Federal Reserve.

Reported that fifteen.

Nineteen US banks maintained healthy capital levels as stress test scenario that looked at help banks -- -- -- severe downturn.

For banks.

Failed the stress tests Citigroup.

Ally MetLife and sun trust but how should you play.

The news here with the stress test trade Matt McCormick -- Gaynor investment counsel.

Banks stop loss -- South -- highs right I used think jump and that you're telling our viewers.

Could be selective what names do you like right.

Sheryl I think when you look at dividend increase is clearly that's a positive sign.

However when you look for bank stocks that on average were down 2.3 percent last -- TDK BW index are up 20% or 21% year to date.

I think of a lot of the positive news from the stress tests are already digested if you're gonna buy banks I would do your -- be selective but look at the winners.

Look at companies like JPMorgan Wells Fargo.

US bank etc.

I don't think you read really need to spent anytime on the losers are ones that were -- able to increase their dividends.

I think when you look at the run up though I would wait for a little bit of applause C if these stocks kinda tried a little bit lower and then I would take a look at buying.

They don't speak you know losers before that we mentioned that you really can't even call lizards and in our called frankly is still in business and sold generating profits -- some paying dividends.

-- these are companies that are on the defense today there are on the defense last night in particular Citigroup let me let me give -- this one they absolutely.

A dispute.

A blog post.

This Federal Reserve base this our reserve.

-- -- grade they say that that the the rebel reserves abduction or capital plan does not equate with bailing.

The stress test allies says -- look at contingent capital MetLife says that -- insurance company we weren't volume at a crack with other founders Mike and what he's saying that.

They have every right to say that they may actually be right Sheryl but I don't think investors are really given much credence to there.

Protests I think you have a standardized tests which everybody was.

Look -- in a similar -- shouldn't have fashion.

And in those who -- able to increase their dividends and buy back shares clearly stand out those who could not.

-- to now be on the defensive and have to dispute why they could not increased your dividend why the feds would not -- him to do that.

And it doesn't matter what they say the market is already voting in you're seeing people as it was yesterday.

Those who cannot increase -- dividends for penalize those who did were rewarded.

And I think when you look from an investment standpoint why bet on somebody had asked to prove a negative wanna bet on somebody it's already exceeding working.

And I think when you look at companies whether the financials -- others companies are increasing their dividends obviously have stronger strength more capital and I think better prospects.

I think though -- there are some of our viewers that do want to frankly gamble on these names -- mean like you were saying you're looking for pullbacks and names that you say.

Obviously are are are better for our viewers and a more stable at the same time -- like suntrust.

Does pay dividend the CFO RD saying hey we're going to be first quarter earnings expectations -- -- we're gonna.

We're going to be the market we're gonna be fine I mean for those -- -- gamblers what he's head of that group out there.

If you really want to gamble I would load up on the European banks I think they are.

I do not think that Greece -- Europe is -- many people feel that everything is hunky dory in Europe and that everything's going to be okay.

Then -- look at the money center banks if you really want to say hey.

What has the best opportunity.

From a completely trading perspective I would look at the beaten down names as expectations -- -- However our investors are very conservative we like the Canadian banks we like regional banks.

We we tend to look at financials as an area.

To avoid -- not to seek it out but if you want to seek out risk in swing for defenses -- look at the ones that are -- beaten down the most yesterday and today.

-- as some of the names that have been.

Played around banded about is -- success stories and all of those people like Wells Fargo people like JPMorgan.

So we do.

By end of those stocks at what point do we do timing seems to be so crucial right now Matt because the financial sector has has so much momentum.

A year today right.

I would wait a little bit I think when you look at news right now you earnings has already been out as you talked about it.

Most these companies share -- had trouble with revenue growth whether be quarter over quarter year over year their earnings are up because they're selling.

From loan loss are non core assets are taking from loan loss reserves.

So I wanted I would kind of be doing my homework but I think there's going to be an opportunity if you're a trader look at before earnings and which -- you think will exceed earnings which ones do you think -- -- have positive rest new revenue growth.

If he could do that it would be very difficult for the naysayers to see these companies.

Have further issues in front of -- however I still have issues about Europe and Dodd-Frank and all the regulatory concerns.

I think you need to be very selective with these names banks are volatile they are not the old banks of old and are certainly not back to 27 they're 2007 highs.

Be very selective look at the want to dividends local with higher capitals be safe.

Don't be risky it's my advice and Matt.

And -- -- Gaynor investment counsel you're quite a voice on the banks met thank you very much it's good to have you hate is the take -- -- It's illness and therefore does sell that in 2007 get out of the banks to -- -- clients a lot of money we always -- -- thanks Matt.

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