My Top Financial Stock Is Not What You Might Expect

[TradeSmith Power Trends logo] [TradeSmith Power Trends logo] October 12, 2024 My Top Financial Stock Is Not What You Might Expect I’ll let you in on a little secret. I don’t invest much in financial stocks. Well, at least traditional ones like banks. We’re about to get inundated with news on some of the biggest financial stocks in the market here in quarterly earnings season. Financials lead the parade, and it started yesterday with JPMorgan Chase (JPM) and Wells Fargo (WFC). More of the biggies come next week. To be honest, financials typically don’t rate well in my Quantum Edge system. The data isn’t strong enough to provide the probability or the size of profits I look for. I typically count on making money 70% of the time, and independent back testing shows my system outperforming the S&P 500 7-to-1 going back to 1990. Banks just don’t bubble up to the top of the list very often. That’s not to say they are bad, but there are usually better opportunities out there. One reason is that banks tend to employ leverage, which means they carry debt. That punishes their fundamental rating. And except for certain periods of unusual price movement, their technicals aren’t typically the strongest either. Let’s me show you a couple of examples. One is a big-time bank, and that other has the quantitative firepower I look for. SPONSORED AD [Something WORSE Than a Crash is Coming]( [image]( The man who stood up on August 29, 2005 and urged the public to buy Nvidia at less than $3 has a new prediction. “The next few days could spark a financial disaster.” But he’s not predicting a crash… a dollar crisis… or anything of the kind. Instead, [he has a much more peculiar warning and a radical new recommendation to review by Oct. 21](. [Click here.]( Good, But Not Great JPMorgan Chase (JPM) is the largest bank in the U.S. It has more than $3.5 trillion in assets, which is the same size as the United Kingdom’s economy and bigger than all but six nations on Earth, and more than 4,800 branches throughout 48 states and Washington, D.C. JPM also just beat earnings expectations Friday morning, and the stock jumped. Shares have even done pretty well here in 2024, up 31% to the S&P 500’s 22%. But it still doesn’t rate a buy in [my proprietary system](. [chart]( Source: TradeSmith Finance That 63.8 Quantum Score is under the 70 level I prefer to see for a buy. Even so, that doesn’t automatically disqualify it. The Technical Score of 70.6 isn’t bad either. But the so-so fundamental rating of 54.2 is a concern. Even though earnings beat expectations in the last quarter, net income fell. Analysts estimate earnings per share will fall 9.4% next year. Coming into this latest report, debt was high at 208.8% of equity. I get that’s part of the banking business model, and but that doesn’t mean I have to invest in companies with high debt. In all my research and decades of data, I found that high debt is often an obstacle to higher share prices. JPM’s data is representative of many big banks. There aren’t too many outliers in this group. Their Quantum Scores are decent, but definitely not leading the market. Here are the Quantum Scores of the next four largest U.S. banks: - Bank of America (BAC): 58.6 - Wells Fargo (WFC): 63.8 - Citigroup (C): 67.2 - U.S. Bancorp (USB): 62.1 Add it all up and the five biggest U.S. banks average a Quantum Score of 63.1. Not bad, but not great. Not as good as we can find elsewhere. In fact, if we just broaden our view of financials – and follow where the data leads us – we find some attractive possibilities. This Financial Stock Has What It Takes One of the highest-rated financial stocks is quite familiar to my [Quantum Edge Pro]( members. Shares have soared 87% since we added it 18 months ago. If you look up Tradeweb Markets (TW), you’ll see it listed in the Financial Services sector, just like JPMorgan, Bank of America, and Citigroup. But it’s as much an investment in technology as it is financial services. It’s a tech company that operates in financial services. That’s why the scores – and the results – look so different. Tradeweb is an electronic trading platform. When it was started in 1998, it was the first multi-dealer online trading network for U.S. Treasuries. Twenty-six years later, the company builds and operates electronic marketplaces for rates, credit, equities, and money markets. The company developed technologies to enhance the trading process, from price discovery to order execution to trade workflows, while also allowing Tradeweb to easily scale up. [chart]( Source: TradeSmith Finance TW’s Quantum Score of 82.8 blows those banks right out of the water. It actually blows a lot of stocks out of the water. It’s a beast right now, with shares surging nearly 30% in just the last three months. I especially like that Fundamental Score of 79.2, which significantly beats banks’ fundamental scores that tend to be more in the 50s. Tradeweb’s superior fundamentals come from solid earnings and sales growth, a strong profit margin, and much less debt than the banks. TW’s debt-to-equity ratio is less than 1%, compared with the 209% we mentioned for JPM. TW’s technical rating of 85.3 is also outstanding. Shares rate well on all the technical data I analyze, and the fact that shares are almost entirely owned by institutions tells us we’re already dealing with Big Money. But my system looks for not just Big Money flows but unusual flow. When the big investors are unusually active in a stock, odds are high that prices will move higher. This shows up in my system as “[green lights]( and in the sneak peek below, you can see the big boys have been buying TW off and on throughout 2024. And especially the last two weeks when we’ve seen six Big Money buy signals. [chart]( Source: MAPsignals.com Everyone thinks stocks go up and down based on earnings, news, or events. Those are important, but what really matters in this age of algorithms and artificial intelligence is where [the money is flowing](. That ability to see where the money is flowing gives you an edge – the [Quantum Edge](. It’s like having an x-ray or MRI machine for money flows. Superior fundamentals, strong technicals, and Big Money inflows are the cornerstones of my quant stock-picking system. When they align, we have the highest probability of making good money, whether the stock is a financial behemoth or a smaller technology innovator. Talk soon, [Jason Bodner signature] [Jason Bodner signature] Jason Bodner Editor, Jason Bodner’s Power Trends P.S. I go into more detail in a special briefing on “[Project Greenligh]( The goal was to study how algorithms (including AI) are taking over Wall Street… and to show folks how to prepare and profit. This [recent video bulletin]( reveals our findings and includes a six-step strategy you can use to turn the AI-trading revolution into stunning gains, like my father did. I also share an AI stock – down to the ticker symbol – that is instrumental in powering the whole U.S. economy. [Click here now for all of the details and to gain access to my strategy and this incredible stock](. © 2024 TradeSmith, LLC. All Rights Reserved. P.O. Box 340087 Tampa, FL 33694 To unsubscribe or change your email preferences, please [click here](. [Terms of use]( | [Privacy Policy](