Wells Fargo, American Express, and More: Warren Buffett’s Favorite Financial Stocks

The third financial stock in Berkshire’s top ten stocks was U.S. Bancorp (NYSE:USB). The regional bank has an even higher P/B ratio than Wells Fargo, with the stock priced at nearly twice book value. However, as with Wells Fargo it’s tough to call U.S. Bancorp overvalued at a trailing P/E multiple of only 11. Considering that the company grew both its revenue and earnings at a double-digit rate in the third quarter versus a year earlier, it looks like a good value to us. Moore Global Investments, managed by billionaire Louis Bacon, initiated a position of 3.1 million shares during the third quarter (check out more of the billionaire’s favorite stocks).

Berkshire owned 5.4 million shares of M&T Bank Corporation (NYSE:MTB) at the end of September. M&T is a $12.5 billion market cap regional bank whose P/B comes in at 1.4. It too has been experiencing strong growth, and its net income was 60% higher last quarter than in the same period in the previous year. We’d expect that growth rate to slow, but it still demonstrates a strong-performing business. We’d also note that the stock’s beta is 0.6 with a dividend yield of nearly 3%, so it’s a good financial stock for defensive investors.

Buffett also liked The Bank of New York Mellon Corporation (NYSE:BK), a financial services firm whose activities include asset management, custody, and cash management. Berkshire owned close to 20 million shares a the end of the third quarter, up 5% from three months earlier. It’s another cheap stock in terms of its earnings, with trailing and forward P/E multiples of 12 and 10 respectively. In the third quarter, Bank of New York Mellon’s earnings were up 11% from their levels in the same period in 2011 and so it’s another financial stock whose business has been doing well recently. We’d consider it as a value stock at these levels.