Dipping a toe into the financial waters...

Written by: Andrew Giovinazzi

We go back to the past in terms of marking financial assets as the FASB (Financial Accounting Standards Board) hits the redo button. While there are solid arguments on both sides for relaxing or not relaxing the accounting standard (Steve Forbes will be happy) market liquidity and “fair value” are linked. Right now, there is no liquidity in these asset markets but there are real assets underpinning the securities. Without an active secondary market Mark-to-Market is a guess.

In mature markets with central clearing functions (for example: the OCC handles the clearing function for the option markets which are no stranger to volatility) this is a non issue. Every security closes with a bid and offer that a regulated, properly capitalized market participant is willing to make. Changing FASB is a half solution until a more permanent central clearing function for asset backed securities (ABS) can be established or the USA will be revisiting this problem very soon.

Short term this looks like a halt to the balance sheet rot of the last 12-18 months. While I am not ready to wade into the single digit Banking names just yet I think it is worth focusing on the best financial names now. Here I will use my Solid Dividends and apply it only to all names finance or finance related.



I will sort the market first by Financial Names to narrow down the range. In this case I am looking only at the top end of this group (Blue Stocks). I have sorted by Market Capitalization (big ones) to better see my choices in Big Cap and Small Cap names for a more informed view of how this metric produces results.


The names that stand out are:

The Chubb Corporation (CB)
McGrath RentCorp (MGRC)
Northern Trust Corp (NTRS)
Brown & Brown (BRO)
Royal Bank of Canada (RY)
Wells Fargo & Company (WFC) (from an earlier column)

There are several banks that fit the criteria but most are too small for what I was interested in. Since I think the new FASB standard is marking a market bottom of sorts, my next column will focus on the single digit numbers that look poised to gain from the new accounting largess. Using AlphaVision should give me those names in about 5 minutes but you will have to wait until next week for a look.

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