Sell stock pick: U.S. Bancorp
Use it as a source of cash for coming emerging market buys.
It’s just not a very good environment for U.S. banks, even one as well run as U.S. Bancorp (USB). That’s why in my June 14 post I recommended selling shares of U.S. Bancorp to raise cash for the better opportunities that looked likely to emerge in emerging markets out of the current chaos.
Even if the Fed doesn’t take any overt action in the next few months to slow its $85 billion program of bond and mortgage-backed asset buying or to raise interest rates, I still think interest rates, especially mortgage interest rates, will continue to inch upwards.
You could already see two effects of that in U.S. Bancorp’s first quarter earnings report. For the quarter that ended on March 31, mortgage originations fell by 3% from the fourth quarter of 2012.
Net interest margins had been dropping across the banking sector in 2012 and, so far, into 2013 -- and although U.S. Bancorp has done a good job of defending its margins, it too has seen some erosion and I think that’s likely to continue.
I’ve owned U.S. Bancorp very profitably (a 36.13% gain plus dividends) in my Jubak’s Picks portfolio since March of 2010, but I think it’s time now to look for shares with more upside and where the headwinds are not quite so pronounced.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares of any stock mentioned in this post as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio.
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Net interest margins had been dropping across the banking sector in 2012 and, so far, into 2013?
Now that's a frick'ng hoot. Banks now want you to take out a 30 yr fixed home loan at 4% but offer you 1% APY on a $100,000 CD. You say the interest margins are dropping. I say screw the banks.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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