written by reader PNC and BAC TARP Warrants

By sandiegojp, November 11, 2014

A friend of mine shares his True Wealth Systems newsletter (Stansberry). Without divulging the entire content (the subject of a previous post from Travis with which I agree), they basically recommend PNC and BAC TARP warrants. I know Travis previously recommended PNC’s.
I notice that the newsletter bases its recommendation on a P/B value ranging from a low of 1.20 to a high of 1.95, with a ”base” (I’m assuming that means average) of 1.62.
However, when I research historical data on this, I find a range of 0.7017 to a high of 1.366, with a ”base” of 0.9628 (See, http://ycharts.com/companies/PNC/price_to_book_value). These, of course, give a very different outlook on the value of these warrants.
I was wondering if anyone could enlighten me here. Do you have any idea which figures are right? Also, how do they figure the potential value of the warrants based on the P/B value?
Also, can anyone enlighten me as to how these guys get the second of these tables, please (sorry about the outlay)?
Here are the full details…
P/Book
Stock Underperform Base case Outperform
Wells Fargo 1.81 1.82 2.19
PNC Financial 1.20 1.62 1.95
JPMorgan Chase 1.14 1.18 1.41
Hartford Financial 1.00 1.31 1.57
Lincoln National 1.23 1.13 1.36
http://www.stansberryresearch.com
That’s why we’re selling most of these warrants today. When you combine ”full value” with lower growth expectations (compared with two years ago), you see that our upside is limited. Take a look…
Return Through Expiration
Stock Underperform Base case Outperform
Wells Fargo -58% -20% 78%
PNC Financial -38% 193% 394%
JPMorgan Chase -24% 38% 171%
Hartford Financial -58% 27% 105%
Lincoln National -24% -14% 50%
http://www.stansberryresearch.com
Thanks a bunch from a newbie who feels somewhat lost at sea.

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