As big banks are set to report their third quarter earnings, Gabelli Funds portfolio manager Macrae Sykes joins Catalysts to discuss his top picks in the sector. Sykes points to Wells Fargo (WFC) as one of his top holdings, explaining that the bank has underperformed since it became subject to an asset cap in 2018. However, the bank is reportedly in the final phase of getting its asset cap lifted, which would be very bullish for the stock. In addition, Sykes believes that investors appreciate Wells Fargo's growth path ahead, noting that there's "hidden value" in the company. Sykes adds that Citizens Financial Group (CFG) is in a solid position after acquiring Silicon Valley, despite facing some NII (net interest income) headwinds next year. When it comes to regional banks in general, he expects these companies to be "better positioned and normalized." He explains, "The CRA (Community Reinvestment Act) to some extent has stabilized a little bit. Real estate is doing a little bit better. So I think that helps them. They're more sensitive certainly to NII than, say, the bigger banks, which have more contribution from other segments as well." Warren Buffett's Berkshire Hathaway (BRK-B, BRK-A) offloaded nearly $10 million worth of Bank of America (BAC) shares, and Sykes says, "Obviously, when the biggest shareholder and one of the world's foremost investors is selling, clearly it gives you pause." He explains that Berkshire likely decided to manage its portfolio risk. However, he sees "pretty good trends" ahead for the bank. To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
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