Over the past year, making money in the stock market has been tough. Inflation is spinning out of control, the Federal Reserve has been raising interest rates for the first time in years, and big tech has finally begun to fall out of favor.
Look back at what would have happened if you had put your hard-earned cash into some of last year’s more popular investments…
Amazon (AMZN), for example, has been an outstanding stock over the last decade; however, buying it at this time last year would have produced a 25% loss.
How about Netflix (NFLX) shares? I am a huge fan of my Netflix service, which has been one of the greatest growth stories of the new century. But the stock is off over 50% over the past year.
Microsoft (MSFT) has been a stalwart for decades. Not a bad call as Mister Softie is down just 2%—but it is still down.
Well, then let’s consider renewable energy. After all, renewables are how we fight climate change and save the world. Unfortunately, the ALPS Clean Energy ETF (ACES) is down 17% for the year.
Electric vehicles? They are the talk of the town all over the planet. Maybe so, but the Global X Autonomous & Electric Vehicles ETF (DRIV) is down about 17% since this time last year.
Like I said: it’s a tough year to make money in the stock market.
That’s unless you have been a bank stock investor focused on low price-earnings (PE) ratios and a high dividend yield. Then you have earned an average return on your stocks of almost 12% over the past year.
All you had to do was screen out all the bank stocks in the United States. Then screen that list down so it was limited to just those banks that yielded over 3% and had a PE ratio of less than 12.
Then, you had to buy the 20 with the largest market caps and go about your life. So while everyone else was pulling their hair out trying to make money in the stock market with schemes and systems, you would have been enjoying life and making money.
I have tested this approach to investing, and it outperforms the index over a wide margin in pretty much every time frame I have ever tested.
It is not exciting.
It does not involve moving in and out of the market like a jack-in-the-box on steroids.
No one at the water cooler will want to talk about the strategy.
It will not make you rich by Tuesday afternoon… or even a week from Tuesday.
What you will do is produce the kind of long-term profits that make your retirement years a lot more enjoyable.
New York Community Bancorp (NYCB) is the highest yielding bank in the portfolio right now. The stock is currently yielding 6.4%, with a PE ratio of just 8.75 at the current price.
New York Community Bancorp just reported record earnings for the second quarter of 2022, including double-digit growth in deposits and loans and record loan originations in the quarter.
Most of the bank’s lending is for multifamily properties in and around New York City. New York Community is extremely good at what it does, as its non-performing assets and loans are well below the national averages for all types of lending.
The second-highest yielding undervalued bank is Premier Financial (PFC), with a yield of 4.21%. Headquartered in Youngstown, Ohio, the bank currently has 75 banking center offices and 12 loan offices in Ohio, Michigan, Indiana, Pennsylvania, and West Virginia. Total assets at the bank are about 7.5 billion right now.
Premier has a much more balanced loan portfolio than New York Community, comprised of single-family home loans, commercial real estate, commercial and industrial loans, and multifamily lending loans in the portfolio.
Premier also had a strong second quarter of the year, with loan growth of 35% year over year and a 12% growth in total deposits. In addition, asset quality improved as non-performing loans were down 26.6%.
The stock is currently trading at just 9.4 times earnings with a dividend that was just raised by 11%.
High-yield undervalued bank investing is the perfect strategy for individual investors. Big funds cannot limit themselves to just 20 stocks, especially since some of these banks will be small midcap companies.
But we can.
This post originally appeared at Investors Alley.
