Buy This Fallen Angel

Today, I am recommending the purchase of processing bank State Street Corporation (STT).

Unlike a typical bank, State Street derives most of its revenues from securities processing and other services related to financial transactions. STT also has an investment management division. Pressure on fees has limited results in recent years, but I believe that there are signs that the company’s results will start to stabilize.

State Street was formerly a favorite of  institutional investors who were looking for a “safe bank,” as it was selling for as high as 18X forward earnings. Today, STT sells at 12X a very conservative earnings per share (EPS) estimate of $5.50, which assumes a corporate tax rate increase after the election, and just 1.1X book value.

Buy STT under $70. My target is $80. I will have more details in tomorrow’s issue.