The Real Return of Bank Stock Returns

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Financial stocks surprised most investors with their unusually bullish performance to begin 2012. Big banks have spurred a big rebound in the stock market this year.

But did you catch the rally?

Last year big banks were the ugly duckling of the market. Not only did most U.S. citizens (in the 99%) question the morality of Wall Street banks, many investors questioned the fundamental value of big banks.

In 2011, the financial index was the worst performing market sector, as it dropped 18% compared to the 2% decline from the broad market. But in 2012 the roles have reversed. The broad market is up 4%, while the Financial Select Sector SPDR ETF (NYSEARCA: XLF) is up 8% . and a staggering 42% from October.

The rally in financials is likely the start of something big, and both investors and traders need to be prepared to flip bullish on banks during 2012.

My favorite bank from the group is none other than the evil vampire squid, Goldman Sachs Group (NYSE: GS). The stock has been beaten back in recent years but the company is resilient. In its volatile 143-year lifetime, Goldman Sachs successfully survived three stock market crashes and a bond market crash.

Goldman Sachs not only survived those events, it came out ahead of the competition. And despite a global slowdown, Goldman Sachs achieved record profitability of $13 billion in 2010 by legally stealing money from U.S. tax payers.

Of course I hate the company. You should too. But while you may shun its morality, you can’t argue against its business success. Goldman shares may easily sink further if the euro breaks up or if China suffers a hard landing. But the stock will likely survive.  It always does. And investors should be rewarded after Goldman Sachs profits from another financial crisis.

Is Goldman Sachs headed higher? And what is the price that it’s heading to?

This video takes you for a tour through GS, showing you when to buy and where to sell the stock.

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Jason Cimpl
Editor, TradeMaster Daily Stock Alerts
Washington, DC

Editor’s Note: Jason’s trading service, TradeMaster Daily Stock Alerts, just had another banner year, including recent gains of  20% on SYNA and 47% on ATML. Click here to learn more about TradeMaster Daily Stock Alerts.

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