What do Realty Income, TD Ameritrade, and JPMorgan Chase have in common? Not much unless you are talking about cheap stocks.
When an investor talks about an "idea," it's often a nod to an investment with potential, but one that he or she hasn't finished vetting. Perhaps it'll be a winner, but maybe further research will cause the investor to toss that idea in the junk pile.
But what happens when you ask investors to offer up their "best ideas" -- that is, the ideas they're most confident in and have done the most research on? Well, you're about to find out, because we reached out to three of the top banking and financials analysts writing for Fool.com and asked them to give us their "best ideas" for right now.
Patrick Morris: Realty Income has been on my radar for months, and June will be the month when I decide to buy in.
I've said it before, and I'll say it again, one of the things I appreciate most about the real estate investment trust, which owns nearly $10 billion worth of property across the U.S., is its diversity. The companies leasing from it span a variety of industries, 49 states, and no single tenant makes represents more than 5.5% of its revenue.
And while the property landscape was once somewhat troubling, it has also clearly recovered from the recession. Despite the fact it has added nearly 1,600 properties since 2011, it turns out the number of unoccupied ones has actually fallen by only 13.
Although it trades at a higher multiple than peer American Realty Capital Properties -- a 16.6 price to adjusted funds from operations versus 12.0 for ARCP -- the reality is, the remarkable success of Reality Income over the last 20 years since it went public warrants the lofty valuation:
Realty Income has a lot going for it, and while the lofty 5% dividend it offers grabs headlines, that is just one of many things making it worthy of an investment consideration.
Eric Volkman: Everybody and their brother wants in on this bull market we're currently cruising through. There's a lot of stock trading in them thar hills, and that's why I'm keen on brokerage stocks in general and TD Ameritrade in particular.
The company's got rock-solid management that's been delivering consistently good results for years now. In fact, both of its last two quarters saw TD Ameritrade notch fresh record highs for net revenues. The company's been moving a lot of paper, and roping in plenty of new clients while doing so. Its daily average revenue trades (a key metric in this business) advanced at a 17% year-over-year clip during this past April, while the percentage increase was similar for total client assets.
For me, TD Ameritrade still beats the competition where it counts. Its services appeal to the everyday investor, as opposed to the somewhat wonky crowd Interactive Brokers (NASDAQ: IBKR) caters to, while it's an operation more efficiently focused on brokering when compared to sprawling competitors Charles Schwab (NYSE: SCHW) and E*TRADE Financial (NASDAQ: ETFC). Oh, and among that crowd TD Ameritrade's current $0.12 per share dividend is the highest in terms of amount, while the yield on that payout (1.6%) comes in a close second to Interactive Brokers' 1.7%.
Jay Jenkins: This month I'm buying JPMorgan Chase. Why? Let's start with profits.
Fundamentally when you buy a stock, you are buying an ownership stake in the company. It's not about watching the stock's price chart rise and fall every day. It's about that business' ability to make money today and in the future. It's about future profits and future cash flow.
To understand a bank's long term profit potential in today's environment, we must strip away all the fluctuating legal expenses, gains from one time only asset sales, and reserve releases to really see the core earnings that will drive the franchise for 5, 10, or 20 years. Following that methodology with JPMorgan, the company earned $23 billion last year.That's about $5.94 per share in core earnings.
The bank is trading at $57 per share at the time of this writing, which represents 9.4 times earnings. At that ratio, JPMorgan today is not just on discount, it's a flat out steal.