I follow overvaluation and watch key indicators. PNC was a screaming sell on many fronts at 67+, the insider selling was very easy to spot. John Hussmans weekly report had valuable information. I am up a full $7 on this one. But I made gobs of money shorting overvalued stocks with poor future or declining future earnings streams.
Big banks especially the high priced/high valued big banks like PNC are OVERVALUED. Sure, you can make trades selling to someone that will pay higher prices, that is what markets are for. But long term trends and reality wins out in the long run. That is why I was negative on long term buying PNC in 2008 at 88, in 2009 at 79, in 2010 at 70 something, because the long term revenue streams are stangnant or declining. The stock price reflects future long term revenue estimates and earnings estimates. If there is no growth, then its value should be based on it dividend or profits paid to the shareholders. Like a bond or preferred stock.
So when would I buy BIG BANKS and hold for the long term. The price has to reflect the value, and right now with no growth or neg. growth and a high PE and price, it is overvalued. This should drop. If my methodology and strategy is correct, Big Banks like PNC that earn some money but are so huge they can't grow (law of diminishing returns) should be value like preferred stocks and should yield 6-7%. So, in order for this to yield 6-7%, the price should drop 65%.
Banks stocks are mispriced, very mispriced and I believe when Bernanke gets fired and interest rates revert to the mean, banks will adjust down and current dividends will determine stock prices with the rate of return at 6-7%, yields of 6-7% will rebuild the middleclass and get people to start investing and creating jobs and seniors will get a decent return of 5%+ on their money market accounts.