This investment bank beat analyst estimates by $0.06 last quarter, posting EPS of $0.20 per share. With interest rate rises on the horizon, now might be a good time to enter the shares at this discounted price.
Cowen Group Inc. (COWN)
from Top Stocks under $10
As an interest-rate hike appears to be moving closer, I am going to play it by taking a 2% position in Cowen Group Inc. (COWN), an investment, research and trading bank. It competes with big players like Morgan Stanley, Goldman Sachs and others.
This company had a 68% rise in profits backed by a 22% increase in sales, and trades at just 3.5x trailing earnings – all while carrying a high B+ buy rating from the Weiss Ratings model. The ratings are my way of finding gems, like COWN, during periods of volatility. This allows us to add undervalued positions that many investors are not yet familiar with.
Financials are starting to come into play, especially as the rate hikes near. The Fed has said it expects short-term rates to move up sometime this year. We’re starting to see more gains in the KBW bank index, which is up 5.5% since March 31, after being down 3% in the first quarter.
There are still remnants of the negative overhang surrounding banks, but rising rates could give banks the flexibility to charge more for loans, boosting their margins. Net interest margins were 3.8% in 2010 and have fallen steadily down to 3.1% for U.S. banks with more than a billion dollars in assets. It is still early in the bank rebound stage, but that is the time to move.
Mandeep Rai, Top Stocks under $10, published by Money and Markets, a Division of Weiss Research, Inc., www.moneyandmarkets.com/services/trading-services/top-stocks-under-10, issues@e.moneyandmarkets.com; 1-800-291-8545, May 27, 2015