This Winning Stock Will Keep Outperforming

Stocks made gains today, as the market digested nonfarm payrolls data, which indicated that the unemployment rate fell to 7.7% last month -- its lowest level since December 2008. The Dow (DJINDICES: ^DJI  ) and the broader S&P 500 (SNPINDEX: ^GSPC  ) were up 0.6% and 0.3%, respectively.

Financials were the second-best performing sector in the S&P 500, with a daily gain of 0.78% (just behind Materials, at 0.83%.) In fact, Financials are the best-performing sector measured month-to-date, quarter-to-date, and year-to-date.

The micro view: The two best-performing Dow stocks today were the big banks, JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) , up 2.6% and 1.7%, respectively. Their closest competitor, and the only other universal bank, Citigroup (NYSE: C  ) , also outperformed today, with a 1.7% gain. Those numbers make my Wednesday column, These Two Stocks Could Lead the Market Higher, look prescient. Let me be absolutely straight with you here: I was not trying to time the market when I wrote that piece, and I had no idea this group would outperform today. This is what I wrote on Wednesday:

Even after today's pop, JPMorgan is the only among the three that trades at a premium to its tangible book value. BofA and Citi trade at rather remarkable discounts -- 21% and 31%, respectively. That suggests the potential for further gains is far from exhausted.

While I don't know how these shares will perform on any given day, I continue to believe that all three have the potential to outperform the broad market over the next three to five years. Of the three, the one I like best is B of A, and it appears I'm not alone. Last month, value-oriented fund manager Bill Nygren, who owns Bank of America in his Oakmark and Oakmak Select funds, explained to Morningstar why the bank could generate double-digit earnings growth even in the absence of any loan growth.

To find out why the Motley Fool's own Anand Chokkavelu recently wrote of B of A shares that, "today's prices are attractive and could result in a double or triple over the next five years," click here to request his premium report, which includes a full year of ongoing updates.


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Related Tickers

7/23/2014 4:01 PM
BAC $15.52 Down +0.00 +0.00%
Bank of America CAPS Rating: ***
C $50.18 Up +0.58 +1.17%
Citigroup Inc CAPS Rating: ***
JPM $59.00 Up +0.33 +0.56%
JPMorgan Chase & C… CAPS Rating: ****

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