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BB&T Corporation Message Board

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  • jim56442 jim56442 Apr 17, 2005 4:06 PM Flag

    buying opportunity

    kfh227,

    You stated the following:
    "Oh, and share price will go up, especially over 6 years. What will CDs do?"

    I hope that your post is correct and the future of this stock will be as you say. However, the above statement is indeed incorrect for the last 6 years. This was the point in my previous post that the stock closed at $40.31 a share 12/31,1998.Closed Friday at $37.08 and even with the dividend increases not a good investment over this time frame unless you consider a 1 1/2 percent annual return a good investment return.

    The question then becomes what is the time frame of short and long term investments. My opinion is that six years is not short term.

    One could have done much better with a CD and the money invested would not have been any where near as badly at risk.

    Jim

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    • boardnazi_is_a_company_schill boardnazi_is_a_company_schill Apr 17, 2005 8:58 PM Flag

      You are a broken record. Look, I agree that BB&T has some serious issues right now (weak commercial loan growth due to employee turnover/poor morale, above market interest rates, below market salaries, more difficult matrix (to uncap), new expense policy, etc). I have stated as much.

      But your argument regarding the $40.31 stock price on 12/31/98 seems flawed. I doubt many people on this board (or on the planet) purchased shares on that single day. And there probably are few that only purchased BB&T shares in 1998 and 1999 and never bought shares again. Most people dollar-cost average or purchase more when they think the price is low, etc.

      If you didn't cost average into your position (AKA... if you bought all your shares on that one day), then you are the one to blame.

      Anyone can look at a long-term chart and see that BB&T was at $40/share for only a short period in 1998-1999. For the most part, BB&T stock was around $35 or lower during that timeframe. What about the people who bought on the one day in 2000 when the stock price dipped to the mid-, low-$20's? You don't see the BB&T stock pumpers/company schills calculating the incredible return since that single day. Why? Because it is flawed logic, and it doesn't hold up to scrutiny.

      It is true that BB&T has been a mediocre/poor investment compared to most banks since 1998 or 1999. If you purchased before that, it has been a very good stock. For fixed income folks, it is a good stock. Or for folks who got burned by the tech wreck, BB&T probably "feels safe" to them too.

      I know you are simply trying to make a point: that BB&T has been a poor investment. Do some analysis on other timeframes, and I think you will see that BB&T has been a VERY good investment to some folks, probably the majority of folks who own the stock right now.

    • Jim -

      Your (somewhat selective) analysis of BB&T stock vs. a CD is interesting. Of course another way to look at the same data (1999-2005) is that BB&T has essentially been in a trading range. (2000 being a notable exception - and perhaps in retrospect an excellent buying opportunity)

      As you suggest, one must factor in the additional risks taken while holding any common stock vs. those of holding a CD. For your selected time window it's pretty clear that a (5 yr?) CD would have been the better way to go.

      I strongly disagree with those who champion BB&T stock on the basis of THEIR longer holding period. That's fine - for THEM - but one must consider the huge amount of stock that's changed hands during your time window. While some have profited nicely from trading within the range, those holding for a longer term and hoping for a total return exceeding that of a 5 year CD have been disappointed.

      Given your analysis, would you suggest that it's better to invest in some other (bank?) stock or that BB&T shareholders would be better served if BB&T were sold/merged/whatever? or that it's simply better to hold CDs or ???

    • But you are forgetting some important things. BBT was not a "good deal" in 1998.

      It was trading $37 with EPS of $1.70 and a dividend of $0.66. That's a P/E of 21 and a yield of 1.8%. Anyone who bought back then expecting BBT to be at $74 six years later was simply foolish.

      But since then, earnings have almost doubled, the payout is more than doubled. Pretty much every metric is up today versus 1999. BBT is trading at a P/E of 12 with a 3.7% yield. That's fair value, even if BBT does 8.3 annually [PEG = (P/E)/total return = 12/(3.7+8.3) = 1].

      It all comes down to DD and in my opinion, CDs are a mistake if BBT is another option. Before saying it's gone no where for 6 years, one must look at why. If this is trading with a P/E of 6 and 9% yield in 6 years (assuming annual 10% growth), I'd be shocked.

      Anyways....... my 2 cents.

 
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