Which stock are investors most enthusiastic about right now? I think Nvidia is the hands-down winner.
Nvidia’s share price has soared close to 130% so far in 2024, and the stock has delivered a return of more than 33x over the last five years. The company’s latest quarterly update predicted tailwinds that should extend into next year and beyond.
But not every investor puts Nvidia at the top of their list. Here’s the one stock billionaire Bill Gross, known as the “Bond King,” thinks investors should be “exuberant” about — and it’s not Nvidia.
Time to be exuberant?
In late February, Gross posted on X (formerly known as Twitter) about his reluctance to invest in regional bank stocks. His post alluded to remarks made by JPMorgan Chase CEO Jamie Dimon related to concerns about the prospects for the U.S. economy.
Regional banks under pressure due to Jamie Dimon comments. He knows the business so I’m not catching a falling knife for now. Value to come
— Bill Gross (@real_bill_gross) February 26, 2024
Nearly one month later, Gross changed his tune about one regional bank stock. He singled out Truist Financial (NYSE: TFC) in an investment-outlook update posted on his website. Gross said about the stock, “Be exuberant in a month or so.”
It’s now been a little over two months since Gross wrote those words, and Truist’s share price is barely in positive territory year to date. The stock is down slightly since Gross voiced his approval.
In the meantime, Truist reported that its total revenue in the first quarter of 2024 slipped 1.4% year over year. The company’s earnings fell nearly 23% year over year, and average deposits declined by 1.6% from the previous quarter.
Why Gross likes Truist
Truist hasn’t given investors much reason to be exuberant. So why does Gross like the stock so much?
Valuation is one of his top considerations. He noted in March that Truist traded at a price-to-book ratio of only 0.89, and it’s current multiple of 0.97 isn’t much higher. When any stock trades below its book value, value investors take note.
Gross liked that Truist was “relatively clean as far as commercial real estate.” The International Monetary Fund (IMF) said earlier this year, “Financial intermediaries and investors with a significant exposure to commercial real estate face heightened asset quality risks.” The IMF added, “Smaller and regional U.S. banks are particularly vulnerable as they are almost five times more exposed to the sector than larger banks.”
Truist shouldn’t be as vulnerable as many of its peers. In Q1, the bank’s commercial real estate made up only 7.3% of its total loan and lease portfolio.
Gross also remained cautiously optimistic that the Federal Reserve will lower interest rates later in 2024, and that will help Truist, but others don’t think the Fed will cut rates this year. However, personal consumption expenditures (PCE) excluding food and energy — a key inflation measure the Fed closely follows — rose only 0.2% from March to April. That was the slowest increase so far in 2024. It could increase the likelihood that rate cuts are indeed on the way.
Is the Bond King right about this stock?
So is the Bond King right that investors should be exuberant about Truist? I wouldn’t go that far.
Other bank stocks are even more attractively valued. For example, Citigroup trades at only 0.63 times book value. Excluding the impact of divestitures, its revenue increased year over year in Q1.
I think investors can find plenty of other stocks outside of the banking industry that warrant more exuberance than Truist. Nvidia is on the list, but so are others with promising growth prospects.
Should you invest $1,000 in Truist Financial right now?
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Nvidia, and Truist Financial. The Motley Fool has a disclosure policy.
Here’s the 1 Stock Billionaire Bond King Bill Gross Says Investors Should Be “Exuberant” About — and It’s Not Nvidia was originally published by The Motley Fool
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