1 Under-the-Radar Bank Stock I've Made 28% On

Goldman Sachs (NYSE: GS  ) is a bank that doesn't get much attention from our Foolish readership, and I have yet to figure out why. I bought my first shares in the Wall Street titan last November, and since then, I've seen returns of 28%.

I hope to change that attitude at least a bit today, starting with you, Foolish reader. Here, then, are at least three reasons you should consider getting into Goldman Sachs as soon as possible.

1. A solid return on equity
Return on equity, or ROE, is a classic metric used to evaluate banks. It measures profitability from an investor's perspective: examining how much profit a company generates with the money shareholders have invested.

Before the financial crash, ROEs in the 20%-plus range were common, but in these days of increased regulation and a still-recovering economy, an ROE anywhere north of 10% can be considered solid. With an ROE trailing 12 months of 10.18%, Goldman hits the mark we're looking for, and comes in just shy of JPMorgan Chase's (NYSE: JPM  ) equally solid ROE of 10.98%.

This is in stark contrast to investor darling Bank of America (NYSE: BAC  ) , which is only managing an ROE of 1.79% TTM. Citigroup (NYSE: C  ) , another bank that gets far more Foolish attention than Goldman, is only bringing an ROE of 4.27% to the investing table.

2. An attractive price-to-book ratio
Price-to-book ratio, or P/B, compares a stock's market value to its book value and is another popular method for evaluating a bank stock.

Technically, P/B is calculated by taking the market capitalization and dividing it by total assets minus total liabilities, but all you really need to know is that a P/B right around 1.0 is desirable (below 1.0 is even better), the idea being that around 1.0, the stock is undervalued and you're getting a deal.

B of A's P/B is currently 0.60. That's very low. For me, suspiciously low. A P/B that low might be a sign the bank is a bargain, or it might be a sign the bank is so fundamentally flawed that investors don't even value the bank at the book value of its assets (essentially what the bank could literally be sold for if it went bankrupt tomorrow).

For the most recent quarter, Goldman's P/B is 1.13. For me, that's right in the pocket, and it says that while investors may undervalue the bank a bit right now, nobody's frightened enough to think it can't be sold off tomorrow for at least some profit. Citi's P/B is 0.72 right now, another suspiciously low number to me.

3. Great leadership and great vision
I might be cheating by working leadership and vision into the third reason you should buy Goldman right now, but here goes anyway.

Goldman's CEO, Lloyd Blankfein, has his act together like few other CEOs in the financial sector. He's one of the sharpest knives in the banking block. In my opinion, he's as on top of his game as JPMorgan's CEO, Jamie Dimon. That's about as high a recommendation as I can give.

And while Goldman didn't come out of the financial crisis as clean and strong as JPMorgan or Wells Fargo, the bank rebounded and began making a profit about as quickly as could possibly be hoped for. There's a reason Blankfein is still at the reigns of this Wall Street powerhouse, even after the horror show that was the crash.

Tied in with Blankfein's leadership is Goldman's commitment to social responsibility. They run two programs in this vein that that I'm particularly fond of: 10,000 Small Businesses and 10,000 Women. Both aim to boost entrepreneurship in different but compelling ways, and both programs commit significant amounts of bank resources and money.  

In my opinion, socially responsible investing is the wave of the future, if not the now. And while it's not a given that Blankfein initiated these ideas, as long as he's backing them, I'm backing Goldman.

Show some well-deserved love, Fools
There you have it. A solid ROE, a good P/B, great leadership and vision, plus 28% worth of proven returns: All great reasons to get into Goldman Sachs as soon as you can. C'mon Fools, start showing Goldman the love it deserves.

Want to learn more about Goldman? How about from The Motley Fool's Senior Banking Analyst? If so, check out our new premium report. In it, Goldman Sachs specialist Matt Koppenheffer tells you everything you need to know to make an informed decision on the bank, including three key areas to keep an eye on. For instant access to Matt's personal take on Goldman, simply click here now


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