Playing Wall Street’s Recovery Without Buying a Bank

by Mitchell Clark, B. Comm.

Hindsight is always perfect in the investment business; if we had known the stock market would have recovered so strongly from the March low, we all would have loaded up. One of the strongest performers since then has been Canadian banking stocks, which, in March, were yielding over 10%. The investing marketplace was looking to buy equity in financials, but just didn’t feel strongly enough about taking on positions in the big investment banks. Investment risk was just too high at the time.

Many of the Canadian banks have appreciated substantially since then, with some moving higher by over 100%. This is impressive for any large-cap group.

There is a way to play the recovery in the financial sector, even if you don’t want to consider a pure-play position in a bank. Investors might consider a company like Thomson Reuters Corporation (NYSE/TRI), which is one of the biggest data suppliers to the financial community. If there’s one thing I’ve learned about Wall Street, it’s that they spend money when they have it. Of course, most of that money is really your money, but that’s the way the system works.

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Thomson Reuters considers itself to be the world’s leading source of information for businesses and professionals. The company sells all kinds of data and resources for professionals in the financial, legal, tax and accounting, scientific, healthcare and media markets. Previously known as the Thomson Corporation, this company just bought Reuters which is one of the largest news organizations in the world. The company is headquartered in New York and has major operations in London, England, and Eagan, Minnesota, with 50,000 employees in 93 countries.

The stock currently yields around 3.5%, but was previously yielding around four percent before the company reported a solid second quarter.

Thomson Reuters beat consensus Street expectations by reporting second-quarter revenues of $3.3 billion, up about five percent from revenues of $3.1 billion generated in the same quarter last year. Net income grew substantially to 325 million dollars, up from net income of 154 million dollars in the comparable quarter. It’s the same old story for a large-cap company. Strong cost controls allowed it to increase its earnings with relatively modest top-line sales growth.

Thomson Reuters is now predicting that financial companies will go on a hiring frenzy over the next 12 months, because they cut too deep during the financial crisis. And when financial institutions hire more people, they need to purchase more data feeds for their employees.

I do like the information business as a long-term investment theme. I also like large-cap companies that pay dividends. Prior to the recent financial meltdown in capital markets, Thomson had a great track record of wealth generation for stockholders.

Playing Wall Street’s Recovery Without Buying a Bank
by Mitchell Clark, B. Comm.

Hindsight is always perfect in the investment business; if we had known the stock market would have recovered so strongly from the March low, we all would have loaded up. One of the strongest performers since then has been Canadian banking stocks, which, in March, were yielding over 10%. The investing marketplace was looking to buy equity in financials, but just didn’t feel strongly enough about taking on positions in the big investment banks. Investment risk was just too high at the time.

Many of the Canadian banks have appreciated substantially since then, with some moving higher by over 100%. This is impressive for any large-cap group.

There is a way to play the recovery in the financial sector, even if you don’t want to consider a pure-play position in a bank. Investors might consider a company like Thomson Reuters Corporation (NYSE/TRI), which is one of the biggest data suppliers to the financial community. If there’s one thing I’ve learned about Wall Street, it’s that they spend money when they have it. Of course, most of that money is really your money, but that’s the way the system works.

Thomson Reuters considers itself to be the world’s leading source of information for businesses and professionals. The company sells all kinds of data and resources for professionals in the financial, legal, tax and accounting, scientific, healthcare and media markets. Previously known as the Thomson Corporation, this company just bought Reuters which is one of the largest news organizations in the world. The company is headquartered in New York and has major operations in London, England, and Eagan, Minnesota, with 50,000 employees in 93 countries.

The stock currently yields around 3.5%, but was previously yielding around four percent before the company reported a solid second quarter.

Thomson Reuters beat consensus Street expectations by reporting second-quarter revenues of $3.3 billion, up about five percent from revenues of $3.1 billion generated in the same quarter last year. Net income grew substantially to 325 million dollars, up from net income of 154 million dollars in the comparable quarter. It’s the same old story for a large-cap company. Strong cost controls allowed it to increase its earnings with relatively modest top-line sales growth.

Thomson Reuters is now predicting that financial companies will go on a hiring frenzy over the next 12 months, because they cut too deep during the financial crisis. And when financial institutions hire more people, they need to purchase more data feeds for their employees.

I do like the information business as a long-term investment theme. I also like large-cap companies that pay dividends. Prior to the recent financial meltdown in capital markets, Thomson had a great track record of wealth generation for stockholders.