Credicorp Ltd. (USA) (NYSE:BAP)
My first featured aggressive financial candidate is Credicorp Ltd. (USA) (NYSE:BAP), a Bermuda-based financial services holding company, and the largest financial holding company in Peru. Although the company is headquartered in Bermuda and operates in Peru, its long-term track record is exceptional. Once again, I will let the F.A.S.T. Graphs™ speak for themselves, other than to say in addition to a great track record, this ADR is expected to offer above-average growth and appears to be very attractively valued at today’s levels.
ICICI Bank Limited (ADR) (NYSE:IBN)
My second featured aggressive financial is ICICI Bank Limited (ADR) (NYSE:IBN), an ADR (American Depository Receipt) headquartered in India. This company is the largest private sector bank in India. Current low valuation is what most attracted me to this aggressive selection. However, I believe that prospective investors should carefully consider the amount of price volatility that has historically occurred with their share price. Nevertheless, for those dividend growth investors with a stomach for risk, this company may be worth taking a closer look at.
REITs
Although I do not consider myself an expert in REITs, a review of the Financial sector would not be complete without at least including them in my screen analysis. After going through most of the REITs that had established track records, I compiled the following list that I felt worthy of further scrutiny. I did include one mortgage REIT, and one REIT, American Tower Corp (NYSE:AMT), that offered growth potential. Otherwise, I only included REITs that I felt were reasonably valued today and offered above-average current yields.
To be clear, I do not consider myself an expert in the subsector, but I did come across some selections that I felt might be worthy of additional research and consideration. Although I consider most of the companies on this list reasonably valued, there are also a few that I would consider fully valued. But I leave it up to the individual reader to make those determinations on their own cognizance. Frankly, I believe there are plenty of quality REITs available, but I also believe that many have extended valuations even in today’s low interest rate environment. Therefore, I suggest caveat emptor, or for those that don’t know Latin, let the buyer beware.
American Tower Corp (NYSE:AMT)
I only include American Tower Corp because I felt it appeared to offer very interesting long-term growth prospects that were unique among the REIT subsector. Furthermore, it should be pointed out that American Tower Corp (NYSE:AMT) has only been a REIT since the beginning of calendar year 2012. Also, the reader should note that in contrast to most REITs, this particular selection does not offer a lot of dividend yield. However, it does offer intriguing growth prospects, especially if it can be purchased a little cheaper than it currently is priced.
As I previously stated, what intrigues me most about this particular REIT is their prospects for growth. Although the current yield is very low relative to most REITs, they are expected to increase their dividend by 20% annually as their AFFO grows. Therefore, in contrast to your typical REIT, this particular example appears to emphasize growth and dividend growth over current yield. Nevertheless, I thought it was an interesting candidate for readers to examine.
Monmouth R.E. Inv. Corp. (NYSE:MNR)
My final REIT example is Monmouth Real Estate Investment Corporation, which I offer as an example for those investors most interested in current income. Although there is not a lot of growth with this particular REIT, their current yield exceeds 6%, and their attractive valuation is what intrigued me most. At first blush, Monmouth R.E. Inv. Corp. (NYSE:MNR) appears to be a potential candidate for yield-hungry investors in today’s low interest rate environment. Although I would stop short of calling it a bond alternative, I believe this particular REIT offers more bond like attributes than most other REITs I examined.
With the above said, it should also be pointed out that this company’s FFO growth rate has accelerated over the last 2 years from its typical 1% average to 9.2%. Perhaps this explains why the 4 analysts that are following the company and reporting to Capital IQ are forecasting 9% growth over the next 5 years. I am not sure that this is realistic or not, but is certainly worth a little research to find out. Additionally, this REIT has a long history of stability and consistency coupled with their above-average dividend yield. Historically, this REIT has produced very little growth, but has established a very consistent dividend distribution record. Consequently, if current yield is your objective, this REIT may be worth further scrutiny.
Summary and Conclusions
The Financial sector was a very interesting sector to examine. In spite of all the controversy that has surrounded this sector in recent years, I was able to find many candidates that I felt possessed quality and consistent long-term opportunities. However, what I did not adequately reflect in this article, is how diverse the Financial sector really is. There were many companies excluded simply because their historical operating results did not meet my standards of quality and consistency.
For those investors interested in banks, it appears that the Canadian banking sector offers numerous attractive opportunities. There were two domestic banks that I felt looked intriguing, but both would represent turnaround situations as they recovered from the Great Recession of 2008. Those banks were Wells Fargo & Co (NYSE:WFC) and M&T Bank. However, only Wells Fargo was featured in the article.
My next article will cover Sector 45 – Information Tech.
Disclosure: Long C, WFC and AFL at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
