In his Friday “Game Plan,” Cramer said banks may bottom soon. But he warned of possible “catches,” including:
The catch here, and there always is a catch, is that if HOV and TOL report poor numbers and the U.S. has lost more jobs, Cramer’s predicting next week would be horrible for the financials. American International Group (AIG - Annual Report), Washington Mutual (WM) Wachovia (WB) and Bank of America (BAC) could sink to multiyear lows.
None of the stocks fare especially well in the models I use. HOV doesn’t even make it past the screens, and Toll Brothers scores among the worst for earnings momentum and return potential.
Bank of America scores poorly for earnings quality, earnings momentum and price momentum. The same applies for Wachovia, which also ranks low for free cash flow. Washington Mutual, by contrast, has a high free cash flow ranking but is also among the worst ranked for return potential.
AIG is the only name on the list that is not a net negative in my models. Its poor scores for earnings momentum and price momentum are offset by high marks for earnings quality and free cash flow.
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
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