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1 Reason Some Investors Avoid Banks

By David Hanson and Matt Koppenheffer - Apr 1, 2013 at 8:04PM

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Why the most common way to judge the value of a stock is going to lead you astray with banks, and where you really need to be looking.

When buying a stock in most sectors, looking at its price-to-earnings ratio can be a quick and easy way to get an idea of how cheap or expensive it is compared with other stocks in its industry. With the big banks, however, the P/E ratio can often fall completely flat on its face and give investors an utterly incorrect picture of what the stock is worth. In this video, Motley Fool financial analysts David Hanson and Matt Koppenheffer talk about why the P/E is so misleading when looking at big banks, and where you should actually be looking.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$35.00 (3.37%) $1.14
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$42.97 (3.12%) $1.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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