Tuesday Promise: Skousen’s safe bank

By Travis Johnson, Stock Gumshoe, July 28, 2008

I mentioned that I wanted to get to this one today — it’s probably not in time for most of you to catch it in the Monday email alert, but here it is anyway.

Mark Skousen is touting a bank stock for his Forecasts and Strategies newsletter, and more specifically he’s predicting that the bank will have good earnings tomorrow (Tuesday) and the stock will climb as a result.

Before you get too excited, note that Skousen has done this before, several times — he has predicted earnings surprises by a few different companies, including ABB, and his track record on these kinds of predictions isn’t necessarily any better than a coin flip … which is probably about what you would expect, given that no one is very good at consistently predicting earnings surprises.

But he also says this bank is an enticing buy, largely because it avoided the subprime slime and has a great growth profile with operations in South America and Portugal.

Here are the clues we get:

“But one international bank never got greedy and never strayed from traditional banking. And a result of their sound business practices they are thriving.

“Earnings are up 22%… operating margins are at 38%… and the company’s management is forecasting 15% earnings growth for the next two years!

“This is a safe bank too. It has a market cap of $112 billion and sells for only eight times earnings.

“What’s more, banks in this remarkable stock’s country are required to have higher reserves for loan losses than other countries. That means this blockbuster bank is secure against a further economic slowdown.”

So what are we dealing with here? It reports earnings on Tuesday — and it will be early in the morning, at 10am CET, so well before the US markets open. That means Monday is the only chance to buy this one before earnings should you so desire.

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And the stock is ….

Banco Santander (STD)

That is, by the way, probably the most unfortunate ticker symbol I’ve seen in some time — one might find it hard to imagine bragging at a cocktail party that “everyone should get STD, like me.”

Banco Santander is a very large Spanish bank, and it doesn’t have much in the way of North American operations, so it has avoided direct exposure to the subprime banking mess here, and I believe it has a relatively small exposure to the kinds of toxic debt that have caused massive writeoffs for their competitors, but I’m a little out of my league when looking at a bank’s books, so take that with a grain of salt. They have, at least, not taken nearly the same kind of hit that many other big banks have — they’re down a bit over the past year, but not dramatically when compared to their competitors.

And they are growing faster than you might expect for such a large bank, with analysts predicting that even with some slowing growth that they will continue to grow at 15% a year for the next five years. If they’re right with their crystal balls, that’s pretty good for a $100+ billion bank.

Here’s a little more of what Skousen said in his ad:

“While U.S. banks are promising shareholders that they will return to traditional banking, this bank never left! More than 80% of the company’s profit comes from retail banking. And they have virtually zero… let me repeat that again… virtually zero exposure to subprime mortgages.

“You see, rather than trying to make a quick buck in subprimes, this thriving bank has been busy doing something else… growing internationally. They are now diversified with major operations in Brazil, the U.K., Chile, Mexico and Portugal.

“What’s more, business is booming. During their last earnings announcement, the company reported that their profits rose 37% on revenue of $11.6 billion!”

I wouldn’t necessarily assume that STD is safe as houses, however — just looking at its main markets gives some pause, since they are active throughout Western Europe but primarily in Spain, the UK, and Portugal, in addition to their Latin American businesses. And most people seem to believe that the UK and Spanish economies, both also largely dominated by residential real estate for the last decade, are the next dominos to fall in the continuing collapse of consumer debt.

I don’t know if that will really happen, but certainly the UK is already feeling some blues, and the Spanish economy is slowing down, bringing Spanish whining about high Euro interest rates and perhaps some regret about being tied to a German economy that won’t let them slash rates to save economic growth. So the fact that they’re not in the US doesn’t necessarily mean that they’re safe, though it’s possible that they’re safer.

What will happen with STD on Tuesday morning? I have no idea — I can tell you that Mark Skousen thinks you should jump in now to catch the earnings bump, but he won’t be buying the shares for you so it’s still really your call.


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olenska
Guest
olenska
July 28, 2008 9:30 am

chart is an enormous M. stay away

farley 5
farley 5
July 28, 2008 9:45 am

This is a 4 for 5 technicals positive in a Favored sector. Monthly and weekly momentum just turned positive. Tight stop loss at double bottom break at $17. Spread tripple bottom at $16.00. This has options so you may want to hedge your stock with earnings tomorrow. Top of the trading range is $21 with an upside target of $33.50. HUGE resistance at $22.

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fireball
Guest
July 28, 2008 11:12 am

i had std, then it went away, then it came back, then it went away again so i must be o.k.. sorry could not resist. seems the smartest play in that direction is pbr while it is down. just my humble guess.

TraderSaint
Guest
TraderSaint
July 28, 2008 12:52 pm

farley5: what a bunch of useless babble. Are you the resident analyst for this site? If so, how about showing us your trade statements for six months?

CollegeStudent
CollegeStudent
July 28, 2008 2:48 pm

Farley 5 has provided this site with very good information for a long time. His insight is respected and very much appreciated.

TV guy
Member
TV guy
July 28, 2008 3:10 pm

Hey….hey…folks. Blunt: cut the garbage. All submissions sent here are based on a Code of Conduct…and that Code is based on RESPECT. All comments are valid and appreciated by all (or most) who read them. We do not get personal…. Stock purchases, investing and “hunches” are all subjective….some are based on technical analysis, some on rumour…some like at the race track…on the colour of the socks. So pick your poison. But do not get personal and criticize another person’s “take” on the marketplace. I sound like a Gumshoe Cop here..but we are building a nice group of contributors and comments that are MOST appreciated by all fellow Gum-shoe-rs. Let’s share, let’s have a nice dialogue and revel in this web site that is so unique.

Sorry to lecture ..on what should be a self-evident set of guidelines. Now…about xyz stock.
Whew !!

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steve
steve
July 28, 2008 4:03 pm

I am new to this site, I did a little searching
and what seems like babble(although i would
use more considerate vernacular)is a technical
charting system called “point and figure charting”
it calculates supply and demand using highs and lows for each day to configure charts. They offer a
free course with tests and all at http://www.dorseywright.com Like i said I dont know boo about it and i might be wrong, it also seems the gumshoe has some respect for Farley5 because he posts his spreadsheet in the tracking section here!
I am sure this is all well known stuff for the usuals here, I can see how one might be confused by a technical analysis if the terms are unknown.
Is this point and figure system useful?Does anyone
actually make money with this system? I would appreciate any enlightenment.

DEWinit
DEWinit
July 28, 2008 4:16 pm

TV Guy — Tks for the good words. I applaud you. DEWinit.

Warhorse
Guest
Warhorse
July 28, 2008 4:43 pm

Right on TV Guy, the gumshoe is providing a very unique service for us here, let’s don’t blow it.
Thanks Travis,
Warhorse

rich roddy
Irregular
July 28, 2008 10:18 pm

kind of agree with fireball. had std, then it went away due to a stop. had another bank a couple of years beck that std was going to buy–can’t remember the name. think pbr may be the way to go. by the time you read this, we’ll know if Dr. Skousen was right. How about any comment on a small canadian engine maker that is supposed to profit immensely from the Pickens Plan? Have missed a couple of days so you may already have covered it–rich

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SageNot
Member
SageNot
July 29, 2008 10:05 am

The 5% earnings miss got “washed” in the market rally this morning. The vol. looks t/b timid as well.

Traveling Westward Ho today, not many signs of the recession so far.

SageNot

destry
Member
destry
July 31, 2008 8:53 pm

I don’t question trading techniques. I like the way you guys think. My style is a position I can keep for a long while…Subject to a return I’d best not ignore for short term profit, or a
difficulty I ignore at my peril…I say that to say this: Trading “STD” for instance, may work fine
using whatever technnique floats your boat.
I would stay away from “STD” because of Spain itself. The Euro is based upon the German financial model. Spain, Italy, and Greece, take in the neck every time the common market adjusts rates. Weak currencies and economies are nearly always at the mercy of strong economies, and currencies. For that reason Spain may very well
be a traders dream, but a longer term holders nightmare. Spain’s economy is a shambles Italy, and Greece are scarcely worth the aggravation.

By the bye…There are now two Middle East ETF’s
for you to peruse…PNMA, and GULF. The reason they may be worth your notice, is that liquidity
appears to be moving East. And for the first time,
investing in the Arab Emerates, is available.

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mhjdowd@yahoo.com
August 1, 2008 11:46 am

I am with destry, being a bit more of a codgy, annoying value investor myself. I can understand how looking overseas at financials can seem attractive to return some of the losses from financials over here. If you are trading on volitility and you hit STD right, you could make some decent bank. In the meantime, you might be able to catch a dividend or two.

Not that I begrudge people who can catch a wave. I am just rarely that smart or that lucky.

But am I wrong to be concerned about a company with such an erratic dividend? Something like that immediately makes me worry that they have far too much exposure that they can’t control. Can someone enlighten?