Allied Irish Banks (AIB)

[Investorman]

5 Banks to Buy Before Goldman Sachs
http://www.fool.com/investing/general/2010/07/27/5-banks-to-buy-before-goldman-sachs.aspx

Anand Chokkavelu, CFA
July 27, 2010


Too many investors get excited and jump into a stock without looking at comparable companies within the same industry or exploring other possibilities.

So, before buying shares in Wall Street dominator Goldman Sachs (NYSE: GS), read on as I give you one (hopefully) compelling reason to consider one of these five banks.

JPMorgan Chase (NYSE: JPM)
Lawrence G. McDonald, a former Lehman Brothers employee and author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, likes JPMorgan's CEO, Jamie Dimon. When I say likes, I'm understating. In a recent Motley Fool interview, my colleague Andrew Bond asked him his thoughts on the highest-quality management on Wall Street. His answer:

Well, the best is clearly Jamie, but JPMorgan, followed by Goldman Sachs, and Deutsche Bank (NYSE: DB) also did a good job navigating through the crisis.

Wells Fargo (NYSE: WFC)
Warren Buffett got a sweetheart deal on preferred shares of Goldman with warrants. He bought plain old common shares of Wells Fargo with no extra inducements way before that, and at one point during the financial crisis declared that when Wells fell to $9 a share in March 2009: "If I had to put all of my net worth into stock, that would be the stock."

Allied Irish Banks (NYSE: AIB)
If pure upside is what you're after, Allied Irish Banks is trading at a price-to-book ratio of 0.1. There are very good reasons for that, including the eurozone debt crisis and company-specific holes in Allied's balance sheet. However, it did pass the admittedly lax European bank stress tests last week.

National Bank of Greece (NYSE: NBG)
Another eurozone bank to consider is National Bank of Greece, which also passed the stress test. On the plus side, its balance sheet appears more solid than Allied's. On the minus side, it's priced that way. Buying this bank is a play that the Greek woes aren't as bad as they're made out to be.

Community Bank System (NYSE: CBU)
Finally, I'm going deep tracks with my favorite small bank. Community Bank System is located in upstate New York. It's pricey, but it's one to keep on your radar if you like straightforward management, conservative lending, a nice dividend, and a business model free of Wall Street shenanigans. OK, that's more than one reason, but I get a little carried away about this bank.

As you decide between Goldman Sachs and these other alternatives (or none of the above), remember that one compelling reason does not an investment thesis make. Each reason is merely a starting point.