Buy Banks Ahead of Q4 M&A Boom: Hilary Kramer


In football, there's the Hail Mary. In baseball, there's the walk-off home run. In soccer, it's the sudden-death goal. No matter the sport, all of these sayings mark a last minute push that ends in victory, and it's exactly what Hilary Kramer of is expecting to happen with the financials late this year.

"Traditionally, mergers and acquisitions are a 4th quarter loaded product that takes place" Kramer points out in the attached video. "The pipeline is full of IPOs that are ready to come out and once we get a bid to this market, you are going to see the floodgates open and a lot of IPO's come out."

Some say, it's already beginning, and point to the best, post-Facebook (FB) IPO calendar last week with 4 names on it as well as the small, but notable acquisition of the social-media site Digg.

In between statistics about low price-to-book ratios and other valuation figures that support her thesis that the "financials are grossly undervalued," Kramer rattles off picks, both large and small, that are not only on the cusp of big moves, but also on the cusp of reporting earnings too, including Goldman Sachs (GS) tomorrow and Morgan Stanley (MS) on Thursday.

Clearly there are more than a few obstacles along her projected path to profits, not least of which are earnings, the economy, and regulation. But given the results and reception given to JPMorgan (JPM) and Wells Fargo (WFC) last week, it would be hard to argue that the stage has not been set for financials this week.

Aside from the big diversified lenders like Citigroup (C), Bank of America (BAC), and American Express (AXP), several niche players like Schwab (SCHW), State Street (STT), and Travelers (TRV) are also reporting this week.

"Part of the (story) with financials has been a multi-year process of shoring up the capital," Kramer says, adding that asset disposals and capital ratios are up while competition is actually down, especially versus big, beleaguered, European banks.

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