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US Bancorp stock price 52-week low: Is Warren Buffett portfolio stalwart USB stock now a bargain buy?

By David Burrows

10:11, 27 September 2022

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In this article:
USB
US Bancorp
43.63 USD
0.6 +1.400%
BRKb
Berkshire Hathaway
305.90 USD
-2.18 -0.710%
BLK
BlackRock
710.04 USD
-1.7 -0.240%

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Warren Buffett speaking in New York: Photo: Getty
Warren Buffett speaking in New York: Photo: Getty

US Bancorp (USB) has for some time been a favoured stock among institutional investors. In fact, around 68% of the company's shares are owned by institutions and within that, Warren Buffet’s Berkshire Hathaway (BRK) is the largest shareholder with just over 8%.

Other notable shareholder names include BlackRock (BLK) and The Vanguard Group. Having a large amount of institutional money invested in a company is often regarded as a good thing for a company. But all is not completely rosy in the USB garden right now. Institutional investors endured heavy losses after the company's share price fell by 8.2% last week.

In fact, the USB stock price has now hit a 52-week low. In early January the stock was around the $63 level but now languishes around $41.

This begs the question is the company a bargain buy right now?

US Bancorp (USB) share price chart

The danger with institutions holding such a high percentage of shares in USB is that they can massively impact the price dynamics of the stock.

Essentially if the stock decline continues – they may feel forced to sell.  This is not good news for existing individual investors but possibly a trigger point for new investors?  

The question for existing and potential investors in USB is ‘is there much wrong with the company?’

USB's current net profit margins (28.4%) are lower than last year (31%). While USB saw a healthy bounce in 2021 – from end of December 2021 onwards both revenue and earnings have fallen.

The banking sector in general has been through a volatile period - pandemic and post-pandemic. Arguably those with investment banking features such as trading, and M&A advising were in a better position. USB is more associated with commercial banking.

DE40

14,280.70 Price
-0.130% 1D Chg, %
Long position overnight fee -0.0086%
Short position overnight fee 0.0004%
Overnight fee time 22:00 (UTC)
Spread 3.0

US30

33,573.00 Price
-0.050% 1D Chg, %
Long position overnight fee -0.0164%
Short position overnight fee 0.0059%
Overnight fee time 22:00 (UTC)
Spread 3

US500

3,931.90 Price
-0.220% 1D Chg, %
Long position overnight fee -0.0163%
Short position overnight fee 0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.7

US100

11,489.10 Price
-0.530% 1D Chg, %
Long position overnight fee -0.0164%
Short position overnight fee 0.0059%
Overnight fee time 22:00 (UTC)
Spread 1.8

USB will release its third quarter 2022 earnings results on Friday 14 October, so market watchers will be keen to see what numbers they produce.  

There is no indication so far that institutional investors will offload USB shares in any great number – assuming the latest trading numbers are not too alarming.  

What is your sentiment on USB?

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Shape of the business

As a business model, USB ticks a good few boxes. For the eighth-consecutive year, it was named one of the World’s Most Ethical Companies by the Ethisphere Institute.

USB is currently ranked 17 in the DiversityInc Top 50 list again this year – highlighting good practice in diversity and philanthropy.

USB has also expanded, in September 2021, it agreed to purchase MUFG Union Bank's consumer business for $8bn.

What is broker sentiment currently towards USB?

Simply Wall St thinks the bank – currently priced around $41 - is below fair value by more than 20%.

The consensus rating at Marketbeat for USB is ‘hold’ with a consensus price target of $58.56.

Of 15 analysts, nine rate the stock a ‘hold’;  five a ‘buy’; and one a ‘sell’.   

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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