The Right Banks to Own

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Much of Warren Buffett's success can be explained by his advice for investors to "be fearful when others are greedy and greedy only when others are fearful."

Since we all know there's fear surrounding the financial industry, now seems like an opportune moment to buy the very best banks (emphasis on "very best") at a significant discount.

Therefore, I used the screener found in CAPS, to uncover banks that had market capitalizations of more than $2 billion, a four- or five-star rating on CAPS, and more than 200 active CAPS picks.

To elaborate on that second point, since we began tracking the performance of our CAPS community, four- and five-star stocks have outpaced the broader market by seven and 12 percentage points annualized, respectively.

Here are the banks our community loves and believes will emerge from this global financial crisis to make investors a lot of money:

Company Name

CAPS Rating (Out of 5)

Market Capitalization


Banco Santander (NYSE: STD  )


$106.5 billion


Royal Bank of Canada (NYSE: RY  )


$55.8 billion


Lloyd's TSB Group (NYSE: LYG  )


$30.6 billion

United Kingdom

Banco Bradesco (NYSE: BBD  )


$55.4 billion


Banco Itau Holding Financeira (NYSE: ITU  )


$55.9 billion


National Bank of Greece (NYSE: NBG  )


$21.6 billion




$13.4 billion


Data from CAPS screen of Aug. 19, 2008, and from Capital IQ, a division of Standard & Poor's.

Not only are they ranked highly in our community of investors, but they're all also international banks, so they're well isolated from the credit trouble and housing mess that U.S. banks are facing today. This isn't to say that they'll avoid the mess altogether, but their risks and leverage problems are likely less than what U.S. banks face.

I encourage you to come and join us on Motley Fool CAPS to do some further due diligence on all of these companies, and let the collective wisdom of more than 115,000 other investors help you in your quest for the right banks to buy in this time of uncertainty.

Fool analyst Adam J. Wiederman owns no shares of the companies mentioned above. Lloyd's TSB is an Inside Value recommendation. National Bank of Greece is an Income Investor recommendation. The Fool's disclosure policy loves the CAPS screener.

Read/Post Comments (2) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 20, 2008, at 10:57 PM, BruceInCola wrote:

    Might want to rethink that comment:

    "they're all also international banks, so they're well isolated from the credit trouble and housing mess that U.S. banks are facing today."

    UK, Ireland, Spain, possibly others facing recession, and specifically housing sector in UK going down the tubes as it is here.

  • Report this Comment On October 09, 2008, at 1:50 PM, SteveTheInvestor wrote:

    Good call Bruce:

    The stock is off about 50% from the 52wk high and down about 30% since the article was written. It's not a pretty picture for banks anywhere on the planet.

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