With just a little reading on your part about quantum mechanics, wave function collapse, quantum decoherence and a thorough understanding of the results of Schrödinger's cat thought-experiment, you could easily see how everything I got wrong in today's market guesses were actually spot on correct.

You could also use all of those theories to explain what a wonderful day I had today (in an alternate parallel universe).  My towel would have been easier to find when I went swimming, my new swimming goggles would have been right where I left them, Devin's alarm clock time would been 17 minutes faster, I would have remembered to pick up the doggie business cards in the back yard, Man Child would have brought a notebook and something to write with on his first day of summer school, the laboratory where I do my quarterly blood draw would have had all my records on their new computer system,  I would have remembered a lunch I had scheduled, Devin would have been able to pick up Man Child from basketball practice, I would not have run over my son's foot when I picked him up from basketball practice (I promised to put this in the post tonight as Devin wanted you all to know what a blcokhead I am.), the home owners association in Las Vegas would not have thought I was my mother in law's landlord, Charles Schwab would have made their trust account application information easier to find on their website, the parents football informational meeting would have been scheduled more conveniently than 6-8PM at night, personal income and outlays would have done what I expected them to do, Nike would have missed estimates, and the market would have been down 1 point.

But in this universe, we struggled though it.   

Breakin Into A Bank

Our regular readers know we have been out of the financial markets after several attempts to turn a buck on the likes of BAC, C, WFC, ZION, HBAN, STD to name a few. 

Today I had the pleasure of meeting a Financial Planner who has been professionally and tenaciously trying to get in front of me.  I enjoyed a lunch today with a new reader, Robert Johnston of Edward Jones.  While it is confirmed that there is no help for me as my whacky strategies are too much for any reasonable Financial Advisor to consider, we did get a chance to talk shop and I told him I was struggling for a bank stock to balance out the Salve Lucrum Portfolio.  Edward Jones has a recommendation rating on PNC, The PNC Financial Services Group, Inc. operates as a diversified financial services company. The company offers retail banking, corporate and institutional banking, asset management, and residential mortgage banking services. Its retail banking products and services comprise deposit, lending, brokerage, trust, investment management, and cash management services.

Fundamentally the bank stock is at a 1.0 price to book value.  While I usually would get all googlie over a P/B like that the entire sector is in such nasty shape that many are trading below their book value so we could not get excited about that.  By comparison, the industry sector P/E is about 21 and PNC looks cheap at 9.1 for the trailing quarter.  Its net operating margin is an impressive 23.3%, however, some of the SEC filings about recent acquisitions suggest the margins are accretive in nature.  (Fancy accounting term that mean could erode over time.)  It's Return On Equity (one of our key indicators) is a lackluster 12.8%, but compared to the industry average of 2.8, it is brilliant.  In reading the last two 10Qs, we could not find anything clunky, but PLEASE DO YOUR HOMEWORK.

Target prices on this bank are in the 69-72 dollar range and it traded today at $57.85 giving us a decent margin of safety in the 25% range.  There is a lot of option activity in the 65-67.50 area for a January 2012 call and put option indicating there are people much brighter than me expecting support or resistance at that level. 

Knowing this would become one of our core value plays, we want to run the Buffet Cruncher on it.  Well I'll be a go to donkey.  It actually measures up really well.  The 10 year estimated annual return based upon historical earnings growth is 10.7% and the 10 year estimated annual return based upon sustainable growth is 13.% giving us an average of 11.85% making this a very likeable prospect and one of the best I have seen in this sector in a long time.

Now troubles are not over in this sector, so if you want a bank stock be patient.  This baby had a 2% jump today in the market.  That was a sector recovery and could come back down a tad.  After you have done your homework, take what ever size position you want to achieve and do 20% increments with the first one shooting for a 57.00-57.25 entry point.  Wait a few day then buy another 20% unless the stock is tanking (loosing more than 5%), then in a few more days another 20% and so on until you get your position.  We have a buy order in for 57.25, but it does not look promising as the after hours pricing has the stock pegged at 58.19.  Let's try sneaking in low. 

WARNING: Chartists do not look at this chart.  It is putrid.  The price in scraping the bottom of a 20.2,2 Bollinger Band and is trading below its 50, 100, and 200 average.  Ignore the chart on this one just put your faith in value.

Salve Lucrum