I promised last week that I would actually write a bull opinion on a stock rather than going around and ripping the social media space. So I’m gonna force my attention over to financial institutions and recommend a buy. Beware: most of my posts are written as a result of something I see in the market. This time, however, I’m writing because I want to be bullish on something.
I was tempted to do something in Europe but given the turmoil and uncertainty, I could not think of anything I’d actually recommend.
So how about Bank of New York Mellon? It’s great asset manager that has gone through a lot of M&A, acquiring asset managers around the world. This does two things: it diversifies their holdings and gives them increased economies of scale. Given that it is in an industry that is going through much consolidation, worldwide research and economies of scale is a good thing. Add to that a wide economic moat and its an attractive company.
So how are the stats? At 21.44 it’s trading at 3/4 book value of 28.51 (ttm). Compared to the S&P 500 it’s trading below PE, Price/Sales, and Price/CF ratio averages also. Therefore, it’s a pretty cheap stock with regard to those metrics.
As I mentioned before, the company has done a large number of acquisitions lately but is not planning any future acquisitions. I believe this will give the company some opportunities to grow organically as these acquisitions settle into place.
Overall, it looks to be a great stock. While it is an “asset manager”, it also is a custodian for a number of funds, giving it the ability to collect fees at low risk, unless something like financial crisis of 2008 happens again and banks start refusing trades from people. But I don’t see that happening any time soon.