Are Deutsche Bank shares good to buy? Finding cheap stocks was not easy in the past because the low interest rates caused a boom in the stock markets. Investors outbid each other, especially in the case of high-growth business models, and valuations literally skyrocketed.
It is different with value stocks: They were largely spared the large price increases, even though they were still at a higher price level.
You could also see cheap stocks, especially among the cyclical ones. Here, for example, shares in the automotive industry were long traded at a single-digit price earnings. That’s still the way it is.
Due to the increase in the expected interest rate level and the uncertainty associated with the Ukraine conflict and the increased price and interest rate level, share prices have been adjusted further.
A stock that has also corrected double-digit since the beginning of the year is German bank (WKN: 514000). Within the last three months alone, the share price has fallen by just over 27% (as of 4 May 2022). In fact, Frankfurt should be a possible benefit of rising interest rates.
The good old days of the Deutsche Bank share
Who does not like to remember the times when the German big bank was still in full splendor? Before the financial crisis, in 2007, Deutsche Bank’s share price was over 85 euros.
Today you no longer get 10 euros for a share certificate. And in terms of dividends, not much has been at stake in recent years either. On the contrary: the stock was diluted several times with capital increases.
Banks have been avoided for a long time
At any rate, many investors have avoided stocks in the financial sector since the financial crisis. One reason was law changes. The major financial institutions also had to free themselves from the legacy of the financial crisis.
Both cost revenues with the consequence that the shareholders did not get anything for a long time either. Instead of paying dividends, equity was strengthened. In recent years, Deutsche Bank has also had to contend with specific individual problems. Is it worth getting started now?
Deutsche Bank shares: Is the turning point now?
At the same time, there seemed to be signs of an epoch-making turning point in the banking sector. More and more large banks are now offering investors lavish dividends with exciting growth prospects. An attractive offer for investors who have few or no bank shares in their portfolios.
Basically favorable valuation of the stock
With an expected exchange rate-earnings ratio of 6.2, Deutsche Bank is rated below the European industry average (as of 05/04/22, Reuters). What’s more, the price-to-book ratio of the stock is only 0.3.
Basically, the largest German financial institution appears attractive. So far, however, this is not a new find. What may weigh on the stock much more at the moment is the conflict in Ukraine.
Financial stocks are cyclical and sensitive to geopolitical tensions. Either way, a new entry is not really necessary despite the favorable valuation at the current price level.
Nevertheless, the banking sector should not be lost sight of. It is, after all, an area of the economy that is of significant importance.
In it you will find many companies with “moats” and “toll bridges”. They are important for high profitability and force customers to pay their fees and commissions if they want to pass.
Warren Buffett also swears by these two basic economic concepts. Banks and insurance companies are two of his favorite investment areas.
For example, Oracle of Omaha has invested in several banks. At present, Bank of America is the largest holding in Berkshire Hathaway’s investment portfolio in this sector.
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Frank Seehawer owns shares in Berkshire Hathaway. The Motley Fool owns shares in and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $ 200 put on Berkshire Hathaway (B shares), short January 2023 $ 265 call on Berkshire Hathaway (B shares) and long January 2023 $ 200 call on Berkshire Hathaway (B shares).