To say we are in a market of historical dislocations is to state the obvious these days. Scandals, bailouts, failures and survivals top the headlines every day.
However, if we look past the headlines to uncover the many companies not making the front covers, we can find some intriguing valuations and interesting stories. Some might offer indirect ways of entering a hot, new market, while others might offer compelling valuations vs. their more direct peers.
On Friday, the U.S. government announced that Bank of America (BAC) would receive an additional $20 billion in bailout funds as the struggling bank continues to try to swallow the mammoth acquisitions of both Merrill Lynch and Countrywide.
Bank of America, which is the nation’s biggest bank by assets, has already received $25 billion dollars in additional capital from the government under the Trouble Asset Relief Program, more commonly known as TARP.
The Wall Street Journal reported that the discussions between "the government and Bank of America began in mid-December when the Charlotte, N.C., bank said it wasn't likely to go through with its acquisition of New York-based Merrill because the losses at the troubled company were larger than expected.”
But all financial firms are not created equal, despite the overwhelming negative press being published today.
Take, for example, New York Community Bancorp (NYB), which on Tuesday actually declined a capital infusion from the TARP. The government was looking to buy $596 million in preferred equity stock.
In a public statement, New York Community Bancorp said the company’s current capital position is “sufficient to support the communities we serve and to enhance shareholder value by growing our assets, our franchise, and our earnings capacity."
Three years ago, Citigroup (C) bid $23 for New York Community Bancorp, and HSBC (HBC) bid $26. Both bids were rejected by New York Community Bancorp's board.
Trading at less than one times its stated book value of $12.41 per share and offering an 8.3% dividend yield, which NYB’s CEO Joseph Ficalora called “rock steady,” New York Community Bancorp is by far the healthiest financial service firm in the market place today.
In other news, Airbus recently said that due to decreased spending by airlines, it expects 2009 to see fewer new orders than deliveries for the first time in six years.
This news coincides with Boeing’s (BA) negative outlook on the aircraft market for the rest of 2009, as the company takes proactive measures to cut expenses and cuts 3% of its work force, which equates to around 4,500 jobs.
Obliviously, the news does not play out well for Airbus and Boeing’s suppliers, many of which are publicly traded companies. These include Ametek (AME), which operates in two primary segments, the electromechanical group and electrical instrumentation; Astronics (ATRO), which supplies electronic and lighting components; Donaldson (DCI), which manufactures and supplies cabin air purification systems, and Eaton (ETN), whose largest aerospace client is Airbus.
Despite the slowdown, the long-term cyclical upgrade of aircrafts is still in place, with Boeing sporting a $271 billion \ backlog for 2.2 million aircrafts and Airbus sporting a backlog of 3,700 planes, which equates to five full years of production.
Posted on Jan. 16, 2009
