Roundtable: Buy This Bank

Over the last year, banks have gone from the investment no one cared about (we know from our past reader interest) to the "it" industry that drives the markets.

Hence, it's time to play: "If I had to buy a bank." For our picks, we'll stick to the big guys that are dominating the news. The choices are:

So, if you had to, which big bank would you buy at today's prices?

Morgan Housel: At these prices, options are growing slim. But if there's one bank I'd say has fully earned its respect, it's JPMorgan Chase.

I'd compare JPMorgan to a cross between Goldman Sachs and Wells Fargo. It's a world-class investment bank tied to a commercial bank that isn't obliterating itself with loan losses. There really isn't anything comparable to it. You've got Goldman, which is minting money from trading, but not much else, making it quite vulnerable to incoming regulations. Plus, the entire world wants to see Goldman die. Then you've got Wells Fargo, which has one of the better loan books in the industry, but its investment banking presence is so slim that even slight deteriorations in that loan book are felt. JPMorgan is the best of both worlds. It's in all the right places without getting into serious trouble. I can't think of any other major bank that can say that today. 

Alex Dumortier: I expressed my thoughts on Wells Fargo in some detail recently, so I'll leave the California lender out of the running this time.

All banks within this group are now trading above book value except for two "problem children" that have been lumped together: Bank of America and Citigroup. While it's true that they are the only two major banks that required multiple TARP capital infusions, they do not face the same challenges.

At this stage, Bank of America could well be the best bet in this group, not because it is the class of the field, but because the handicapping on BofA shares is off, i.e., investors misunderstand and, hence, are mispricing the firm's true earnings power. It should be clear to all that the crisis has solidified Goldman Sachs' and JPMorgan Chase's position at the top of this group, but it takes more effort to figure out how things will shake out for the other institutions, particularly a "problem child." That's the very reason bank stock-pickers should consider spending some time looking at BofA.

Matt Koppenheffer: Investing wisdom holds that there is opportunity in uncertainty, and that has certainly held true for financial shares over the past seven months. But for my pick I'm going to go ahead and shy away from uncertainty.

That means that though Wells Fargo may have the best core banking operations of the big banks, the Wachovia skeleton in its closet (and Golden West along with it) is keeping me away. Bank of America, Citigroup, and JPMorgan Chase, meanwhile, have all had less-than-stellar showings from their banking operations, and it's still unclear exactly how recent acquisitions will play out for B of A and JPMorgan.

So where do I see the least uncertainty right now? Goldman Sachs. The company has shown a Chuck Norris-like deadliness when it comes to raking in cash no matter how crazy the markets get and it seems very well positioned to make a killing during the recovery. These certainly aren't shares I'd stash away in the "keep forever" pile, but at least for the near term, Goldman looks like the place to be.