Ask any investors whether bank stocks are good investment.
Chances are many will say yes. They will praise about their infallible market position and powerful balance sheet.
But the truth is, banks are naturally leveraged companies and their Debt-to-Equity Ratios can be at least 500%!
That means should a bank run occurs they won’t be able to meet all immediate depositor’s demand. They can still bankrupt. Your investment value can still fall to ZERO!
Since banks’ financial statements are totally different than your run-of-the-mill stocks I will NOT be using factor-based investing strategies.
Instead, I’ll be evaluating their cheapness & potential based on the 5 factors below.
#1. Price-to-Book Ratio
One of my favourite ways of investing is to buy assets (net of liabilities) below their value. And supporters of Dr Wealth will know that we use a strategy known as the Conservative Net Asset Value (CNAV). But CNAV would be …