Capital One is on schedule

Posted Sep 10th 2009 6:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

I'm reiterating my Buy rating for Capital One Financial (NYSE: COF), first recommended on May 7, 2009 at a price of $29.41. If you purchased COF then, you're up about 28%.

There's considerable risk with COF, due to the possibility of an increase in delinquencies and charge-offs if a double-dip recession occurs.

Still, the view from here argues that the U.S. recovery will be strong enough to (finally!) end the massive cutbacks in jobs, and with rising employment, that should be enough to keep Capital One headed toward profitability. I've raised the Sell/Stop Loss to $28 from $12 to guard against any surprises. The First Call FY2009/FY2010 EPS estimates for COF are a loss of $1.45 and a profit of 67 cents.

Stock Analysis: Capital One Financial is a high-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in COF now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your COF position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $28.

- -

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Capital One Financial, COF

Print this

Reader Comments (Page 1 of 1)

9-10-2009 @ 7:11PM

howaboutthis said...

If you bought any stock in the the big financial companies, your stock would be up right now. So saying you recommended in May and would be up 28 percent now is a no-brainer. Hey, if you bought BAC or WFC in may, your stock could be much higher than the 28 percent buying COF. Maybe I should take your job.