How to Find Big Profits in Banking
Monday, March 20, 2006 | Dylan JovineRating:
Hi Investor, It's Monday morning, and I have banking on my mind.
No doubt, a portion of it has to do with Jason's article below recommending a couple of banking stocks for you today.
But it was something he alluded to in his article that really started me thinking about the banking industry. In the article he says, "Many of us here at Tycoon made a killing with bank mergers and acquisitions in the early 1990's."
What Jason is specifically referring to is an amazing two year period of time - from 1994 to 1996. We must have recommended twelve to fifteen bank stocks to our clients, and most of them were taken over at huge premiums from where we recommended them.
12 bank takeovers in 24 months!
Looking back now, what made our stunning run of success even more special is that we had our sweet little run before the easy-money Roaring 90's really took off.
At first everybody at the firm thought we were trading on inside information.
Even our firm's head trader, Henry O'Brien (who like/sounded/acted remarkably like Gary Oldman in the movie "The Professional"), would grunt to me that I'd "better watch what I was doing."
Of course we weren't trading on inside information at all. What was happening was that we were just discovering our powers of analysis. You see, we'd concluded that the banking industry was going to consolidate in an effort to reach the scale necessary to compete internationally and to lower costs.
Once you realized that consolidation was a foregone conclusion, the only thing left to do was to find strong banks in areas that were desirable enough for the money center banks to pay up for.
Michigan National Bank. Chase Manhattan Bank. Greenpoint Bank.
These were easy targets for anybody who was patient enough to do their homework …
Today, the banking world is much different. The majority of the consolidation (but not quite ALL, according to Jason) is over, and the easy money is gone. And whatever benefit is left over from the repeal of the Glass-Steagal act has been wrung dry.
While the easy money might be gone in banking, there are a few great ideas from time to time, so take a look at what Jason has to say below.
Enjoy,
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Dylan Jovine
Contributing Editor
The Tycoon Report
