Should I invest in American Riviera Bank stock (ARBV)?

Here are three reasons to invest in American Riviera Bank stock (ARBV) and three reasons to avoid it.

What does American Riviera Bank (ARBV) do?

A small bank in Santa Barbara, Calif., American Riviera opened in July of 2006. It’s done well, too, recently recently merging with The Bank of Santa Barbara. That gives ARBV two community branches, both of which are focused on growing their deposit bases and expanding lending.

Three reasons NOT to invest in American Riviera Bank stock (ARBV)

1) Under-performance. Year-to-date, ARBV is underperforming the S&P 500. Shares are up 3 percent while the broader market is up north of 5 percent. Still, that’s better than some of the nation’s largest banks. Bank of America (BAC), for example, is down more than 7 percent this year, and JPMorgan Chase (JPM) is down half a percent.

2) Merger woes. ARBV recently merged with The Bank of Santa Barbara. Unexpected costs or difficulties with the merger could impact the bank’s ability to make a profit. Mergers that look great on paper can sometimes result in culture clashes that negatively impact a business.

3) Over-the-counter shares. ARBV trades over-the-counter – not on a national securities exchange like the NASDAQ. That means ARBV isn’t held to the same stringent reporting requirements as companies on the NASDAQ. We know less about ARBV than we do other banks that trade on the NYSE.

Three reasons to invest in American Riviera Bank stock (ARBV)

1) Strong growth. 2015 saw significant growth for the bank. According to ARBV’s 2015 annual report, the company grew its average total loans by 14 percent to $179 million. The bank also grew its average assets by 12 percent to $232,000. All told, the bank had net income of $1,303,000 in 2015 (unadjusted for non-recurring merger-related costs). That worked out to $0.48 per share. “Our bank finished the year with a record $249 million in assets and 18% higher pre-tax income over 2014 excluding merger related costs,” the company wrote.

At the end of 2015, ARBV had a book value of $10.56. Today, shares are trading at $11.65. Over the past five years, ARBV shares have appreciated more than 124 percent. That’s well above the S&P 500’s return of 84 percent. “Our goal is to reach a $1 per share earnings run rate by year end,” ARBV wrote early in 2016.

2) Great track record. American Riviera Bank celebrated its 10th anniversary on July 18, 2016. The finance industry is one of the most heavily regulated industries on the planet. Staying in business and growing over the course of a decade (particularly through the housing and financial collapse of 2007-2008) is impressive.

3) Merger time. American Riviera Bank merged with The Bank of Santa Barbara effective January 1, 2016. While this is adding significant merger-related costs to the company’s books, ARBV believes the “merger has positive financial synergies.” If you’re looking for growth, two branches are better than one.

Should I buy American Riviera Bank stock (ARBV)?

ARBV’s shares look appealing so long as interest rates begin to normalize. Artificially-low interest rates make it difficult for banks to generate big profits as the spread between their borrowing rate and the rate they lend to customers is small. If ARBV can continue to grow, it will do so by capturing more of the Santa Barbara County market – an area with a median household income of $63,409. Santa Barbara County is the 17th-wealthiest county in California. Right now, ARBV controls 2.77 percent of the market there (by deposits).

Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here. Full disclosure: I do not own a position in ARBV, and I do not plan to initiate one in the next 72 hours.

Silver price manipulation case narrows in on JPMorgan; drops HSBC for now

The media tends to brush off reports of manipulation in the silver market. Hopefully, this lawsuit will change that.

A new wrinkle in the silver price manipulation lawsuit against JPMorgan Chase & Co. (NYSE:JPM) has dropped the spotlight off HSBC Holdings PLC (NYSE:HBC) for now. The fresh lawsuit amendment, which was filed last Tuesday, now names JPMorgan as the sole defendant in the case (per the Wall Street Journal).

Here’s what we know: a lawsuit filed by individual silver investors alleged that JPMorgan and HSBC amassed massive short positions in silver futures between 2008 and 2010, then reaped the rewards as silver prices declined in the face of the large short positions. The new move drops allegations against HSBC, as investors have entered into a tolling agreement with the London bank.

Tolling agreements give both sides in the case time to negotiate a settlement. Should those talks crumble, HSBC could be re-added to the lawsuit. A tolling agreement certainly isn’t an admission of guilt on HSBC’s part, but it’s a clear signal that they don’t want to go to trial (perhaps to avoid the massive legal fees, the bad press, or because they fear they’d be on the losing side of the case). What bothers me about the agreement is the fact that we may never know whether HSBC was truly involved in attempting to manipulate the price of silver – especially if JPMorgan enters into a similar agreement in the future.

New numbers in the amended lawsuit allege that JPMorgan’s shorts pushed silver prices down 12 percent in a single day – a move that, if true, made the bank $220 million.

All told, more than 43 separate silver price manipulation lawsuits were filed against JPMorgan and HSBC (per Reuters). Those lawsuits were eventually combined into a class action lawsuit.

“The complaint alleges that HSBC and J.P. Morgan made large, coordinated trades, among other things, to artificially lower the price of silver at key times when the precious metal should have been trading at higher levels,” the law firm Girard Gibbs LLP writes on its web site. “By depressing the price of silver, the class action alleges that the defendants made substantial illegal profits while harming investors and restraining competition in the COMEX silver futures market.”

Due to it’s small size and relative lack of liquidity, the silver market has often been the target of price manipulation (see my post Silver Thursday, the Hunt Brothers, and the collapse of a precious metal for more). But there’s also a tendency for the media to brush off reports of manipulation in any markets – particularly emotionally-charged markets like precious metals. This lawsuit could help bring visibility to a problem that’s lost a lot of money for a lot of people. Let’s just hope it makes it to trial.

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Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks

Of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!).

When I first started writing this blog post, I was going to call it “How to Invest Safely in Stocks.” My second recommendation was that beginners should start with a handful of the 30 stocks that make up the Dow Jones Industrial Average. Once I started digging through the numbers, though, I was a startled at what I found. Apparently, the blue-chip stocks aren’t the no-brainers most investors like to think they are.

Need proof? Check out this chart I put together of the 10-year returns for each of the 30 Dow Jones stocks:

Company 10-Year Stock Return 10-Year Dividend Return on $1,000 investment $1,000 is now worth
3M Company +46.6% $590.94 $3,458 (aided by a stock split)
Alcoa Inc. -68.1% $134.46 $449.82
American Express Company +41.47% $122.40 $1,514
AT&T Inc. -31.8% $357.12 $1,024
Bank of America Corp. -51.8% $718.58 $1,109
The Boeing Company +12.54% $218.16 $1,311
Caterpillar Inc. +208.7% $787.17 $7,093 (aided by a stock split)
Chevron Corporation +113.9% $794.85 $4,791
Cisco Systems, Inc. -7% $7.20 $933
The Coca-Cola Company +45.2% $284.76 $1,734
du Pont +11.1% $372.72 $1,462
Exxon Mobil Corporation +82% $319.44 $2,086
General Electric Company -61.9% $200.4 $572
Hewlett-Packard Company +2% $123 $1,129
The Home Depot, Inc. -32.7% $117.58 $780
Intel Corporation -29.7% $136.54 $825
International Business Machines Corp. +57.1% $127.26 $1,605
Johnson & Johnson +20.8% $257.22 $1,426
JPMorgan Chase & Co. -16.1% $273.12 $1,107
Kraft Foods Inc. +8.7% $283.34 $1,339
McDonald’s Corporation +198.4% $387.25 $3,351
Merck & Co., Inc. -51.2% $218.70 $698
Microsoft Corporation -20.1% $416.64 $1,998
Pfizer Inc. -56.3% $196.56 $634
The Procter & Gamble Company +68.6% $607.79 $3,884 (aided by a stock split)
The Travelers Companies, Inc. +11.8% $120.34 $1,206
United Technologies Corporation +94.9% $529.54 $4,305
Verizon Communications Inc. -31.5% $305.33 $988
Wal-Mart Stores, Inc. +4.7% $130.29 $1,141
The Walt Disney Company +25.1% $110.20 $1,330

What’s startling is this: of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!). That’s remarkable considering I didn’t factor in inflation, which have averaged 2.4 percent over the past decade (per FinTrend.com).

That means your odds of throwing a dart at a list of the Dow stocks and hitting a winner are only around 63 percent. That’s not much better than going to the casino and counting a few cards at the blackjack table.

Before you toss your hands up and cash in your IRA for guns and ammo, though, I’d be remiss if I didn’t point out that the average return on $1,000 for the 30 Dow component stocks was $1,842 over the past 10 years. Indeed, a $1,000 investment in Caterpillar Inc. (NYSE:CAT) would be worth $7,093 today. That’s not bad, but seeing the returns from a company like GE, which has crumpled more than 60 percent over the past 10 years is scary. And this year hasn’t been kind to the Dow, either. Take a peek at the YTD returns on each of the component stocks:

Company Ticker YTD Return Dividend Yield
3M Company NYSE:MMM -10.8% 2.86%
Alcoa Inc. NYSE:AA -27% 1.07%
American Express Company NYSE:AXP +3.9% 1.61%
AT&T Inc. NYSE:T -3.17% 6.05%
Bank of America Corp. NYSE:BAC -51.8% 0.62%
The Boeing Company NYSE:BA -10.5% 2.88%
Caterpillar Inc. NYSE:CAT -14.7% 2.3%
Chevron Corporation NYSE:CVX +2.25% 3.34%
Cisco Systems, Inc. NYSE:CSCO -25.8% 1.6%
The Coca-Cola Company NYSE:KO +2.28% 2.79%
du Pont NYSE:DD -12.1% 3.74%
Exxon Mobil Corporation NYSE:XOM -4.02% 2.68%
General Electric Company NYSE:GE -17.3% 3.97%
Hewlett-Packard Company NYSE:HPQ -41.9% 1.96%
The Home Depot, Inc. NYSE:HD -7.9% 3.1%
Intel Corporation NYSE:INTC -7.85% 4.33%
International Business Machines Corp. NYSE:IBM +8.33% 1.89%
Johnson & Johnson NYSE:JNJ -1.51% 3.6%
JPMorgan Chase & Co. NYSE:JPM -21.2% 2.99%
Kraft Foods Inc. NYSE:KFT +6.47% 3.46%
McDonald’s Corporation NYSE:MCD +14.3% 2.78%
Merck & Co., Inc. NYSE:MRK -13.1% 4.85%
Microsoft Corporation NYSE:MSFT -14% 2.67%
Pfizer Inc. NYSE:PFE +0.9% 4.52%
The Procter & Gamble Company NYSE:PG -4.07% 3.40%
The Travelers Companies, Inc. NYSE:TRV -11.8% 3.34%
United Technologies Corporation NYSE:UTX -14.02% 2.84%
Verizon Communications Inc. NYSE:VZ -2.6% 5.6%
Wal-Mart Stores, Inc. NYSE:WMT -3.23% 2.80%
The Walt Disney Company NYSE:DIS -14.6% 1.25%

Just seven out of the 30 Dow component stocks have actually appreciated in value this year. That should give you pause before you invest in a high-profile company solely on the strength of its name and brand.

The Takeaway

Here are three key things I take away from the charts above:

1) Energy is the name of the game. One sector in the Dow has strongly out-performed others in recent years. Namely, oil (ala Chevron and Exxon). And I wouldn’t expect that to change – particularly as fears over inflation mount.

2) Banking stocks have a lot of ground to make up. The fact that JPMorgan Chase is down 16.1 percent over the past 10 years, and Bank of America’s down a whopping 51.8 percent could get you thinking banking stocks have to turn the corner soon. I’d argue there’s a lot of pain for them on the horizon, particularly with the imminent threat of inflation. Banks thrive and dive on interest rates, and all those fixed mortgages BAC’s underwriting at 3 percent could come back to bite them in a high-inflation environment. That’s a big part of why banking stocks have fallen in recent months, and it’s a trend I expect to continue.

3) Follow the macro-trends. If you would have invested $1,000 in gold at the start of 2001, you’d now be holding onto $6,797 in bullion. Energy and inflation are the stories du jour, and your portfolio should reflect that reality. No one can say the next 10 years will play out the same as the past 10, but we can say the demand for oil isn’t going away anytime soon, and neither is our government’s debt problem. You can’t afford to ignore the macro picture anymore, unless, of course, you’re happy rolling the dice in your IRA.

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Why Bank of America stock (NYSE:BAC) got crushed

It’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. Here are five reasons why.

It’s not often that one of the 30 largest stocks in the country drops 20 percent in a day. That’s what happened to Bank of America Corporation (NYSE:BAC) yesterday, though. The Dow component stock crumpled from $8.17 a share to $6.51 and it shed another 1.5 percent in after-hours trading.

Year-to-date, Bank of America stock is down 51 percent. But the bad news just doesn’t seem to be going away for America’s largest bank holding company. Here are five reasons the stock got crushed yesterday:

1) The mother of all lawsuits. American International Group, Inc. (NYSE:AIG) filed suit against BAC yesterday seeking at least $10 billion in damages for alleged fraud at the bank and at Countrywide Financial, a mortgage origination company that Bank of America acquired in 2007.

2) Did we mention the other lawsuits? AIG is just the latest in a string of high-profile lawsuits against BAC. Freddie Mac, Fannie Mae, BlackRock, Inc. (NYSE:BLK), PIMCO and Goldman Sachs Group, Inc. (NYSE:GS) have also filed suits against the bank. And no one’s sure just how much it’s going to cost BAC to defend itself (not to mention how much it will cost if the bank does have to pay for damages one day).

3) Stock dilution, anyone? Bank of America maintains its stance that the company won’t have to issue more shares in order to cover costs associated with ongoing litigation. If the lawsuits keep coming, though, BAC might not have a choice. Win or lose, lawyers need paid.

4) Jumping ship. Regulatory filings released yesterday showed that hedge fund manager David Tepper of Appaloosa Management LP took a carving knife to his stake in BAC last quarter. Tepper pared off 42 percent of his holdings in the bank, narrowly escaping the guillotine that dropped yesterday. The news of Tepper’s move added fuel to an already fiery sell-off.

5) Downgrade central. In just two trading days, Bank of America shares were downgraded three times. On the heels of downgrades from Standard & Poor’s and Wells Fargo, the most recent thumbs-down comes from CLSA analyst Mike Mayo (per TheStreet). Mayo cut the stock from “buy” to “outperform” (which almost seems meaningless considering the stock’s loses year-to-date). Still, it’s yet another vote of no-confidence for BAC.

All told, yesterday’s 20 percent plunge in Bank of America’s share price wiped out $16 billion. Other banks didn’t fare much better, but it’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. For the year, BAC is down 51 percent. Citigroup Inc. (NYSE:C) is down 41 percent YTD, Wells Fargo & Company (NYSE:WFC) is down 26 percent, and JPMorgan Chase & Co. (NYSE:JPM) seems heroic having lost just 20 percent since the start of the year.

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HomeStreet IPO: 5 things you didn’t know about Homestreet’s stock

HomeStreet Bank filed for an IPO late last week as the company looks to raise some capital after heavy losses during the financial crisis of 2008. Here are five things you probably didn’t know about the Seattle-based bank culled from the company’s S-1 filing.

HomeStreet Bank filed for an IPO late last week as the company looks to raise some capital after heavy losses during the financial crisis of 2008. Here are five things you probably didn’t know about the Seattle-based bank culled from the company’s S-1 filing:

1) An IPO by decree? HomeStreet’s under orders from the Office of Thrift Supervision and the Federal Deposit Insurance Corp. to raise regulatory capital and reduce problem assets. After failing to raise enough regulatory capital last year, the company chose to turn to the markets to shore up its books. That makes HomeStreet “subject to certain restrictions on our operations” until it satisfies the government’s capital requirements. An IPO should generate enough cash to lift the increased regulations on the company.

2) Storied history. Founded 90 years ago, HomeStreet has the oldest continuous relationship with Fannie Mae in the country. They were the second company approved by Fannie Mae at its founding in 1938.

3) Scope. As of December 31, 2010, HomeStreet had total assets of $2.49 billion, net loans held for investment of $1.54 billion, deposits of $2.13 billion and shareholders’ equity of $58.8 million. All told, the company operates 20 bank branches and nine stand-alone lending centers from the Puget Sound to Hawaii. The bank’s branches averaged $106.5 million in deposits last year.

4) New Management. In August of 2009, HomeStreet overhauled its executive management team as part of its turnaround strategy. Mark Mason, former CEO of Los Angeles-based Fidelity Federal Bank, was named CEO at HomeStreet. “A substantial portion of Mr. Mason’s career has been spent resolving or recapitalizing troubled institutions, restructuring operations and upgrading troubled loan portfolios,” the company writes in its S1 filing.

Mason’s strategy at HomeStreet thus far has emphasized offloading the bank’s other real estate owned property, restructuring troubled loans and implementing stricter underwriting policies.

5) Turning the corner? HomeStreet’s revenue was up $8 million last year to $39 million (though well off revenue of $90 million in 2007), and the company’s net loss fell from $110 million in 2009 to $34 million in 2010. Once HomeStreet’s regulatory status is lifted, the company plans to expand the number of branches it operates and look at potential acquisitions in the Pacific Northwest.

Homestreet stock ticker: NASDAQ:HMST
Homestreet IPO date: July 2011

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Is Ally IPO a buy?

Will the Ally IPO be a buy? Here are three (not necessarily convincing reasons) to be bullish on the stock.

Welcome to the new incarnation of GMAC: Ally Financial, Inc. The storied company was originally founded by General Motors in 1919 as a lending house for car buyers. Nearly a century later, GMAC had expanded into insurance, online banking, and subprime lending.

It was subprime lending, of course, that would eventually knock GMAC Bank to its knees in May of 2008. The Federal government swept in, buying ever-larger chunks of the company until – in December of 2010 – it would become the majority stakeholder. Out of the ashes would rise Ally Financial, a bank holding company that’s announced plans to go public with an IPO in the next several months. Will the Ally IPO be a buy, though? Here are three (not necessarily convincing reasons) to be bullish on the stock:

1) Dollars and cents. Ally’s got a long row to hoe, but at least it’s profitable. As it stands, the company owes the U.S. Government $12.3 billion in funds received from the TARP program. That’s even after Ally’s already repaid $4.9 billion. There are glimmers of hope, though. Early figures estimate the company could raise $5 billion (per Reuters) from an IPO. That figure could grow as Ally’s IPO date nears, too.

While Ally owes the government $12.3 billion, the Treasury holds $5.9 billion in preferred stock. That means Ally actually needs to come up with just $6.4 billion to pay off the government (before any interest Uncle Sam decides to take). Total net revenue at Ally grew 22 percent last year to $7.9 billion. That was good enough $1.1 billion in profits.

2) New car anyone? I like to think of Ally as an extension of the auto industry. The bank, after all, funds 80 percent of all GM dealers and half of GM’s customers, according to the Capitalistpig Hedge Fund‘s managing member Jonathan Hoenig. Indeed, Ally financed 10 percent of all new cars sold in the U.S. last year. As the prospects for the auto industry improve, so too do Ally’s.

3) Diversification. To be successful moving forward, Ally will have to find creative new ways to make money. Mortgage lending rules will be tighter, and fees the bank can impose on its customers will be smaller. It’s clear the company must find new ways to make profits. That might not be as difficult as it sounds. When you’ve got $172 billion in assets, there are a lot of potential directions you can go in. Given Ally’s leadership in online banking and its early foray into subprime lending, the company has shown it’s not afraid of taking risks. If it makes better choices moving forward, this IPO could unlock a new and exciting chapter in the company’s future.

Bears will be bears: The bearish case against Ally is just as powerful as the bullish case, though. Since the company’s prospects are so pervasively intertwined with the fortunes of General Motors Company (NYSE:GM) and Chrysler, headwinds for American automakers mean headwinds for Ally. And gauging by the performance of GM’s stock since its IPO (down 10 percent), it looks like it’ll be a while before investors start jumping on the bandwagon again.

Then, there’s the pesky matter of dealing with regulators. Ally’s mishandling of foreclosures last year could ultimately lead to a multi-billion dollar fine from the government.

While the publicity surrounding Ally’s IPO will make it a tempting daytrade, it doesn’t take much looking to find companies with more intriguing growth profiles. Smaller companies might not have the name recognition of Ally, but they’ve probably got better financials – and that’s what matters in the long run. Until we see more innovation at Ally, there just isn’t a whole lot to get excited about.

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How to invest in ISIS

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies.

Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.

The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.

ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:

Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.

Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.

While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.

It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.

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Net income at Noah Holdings (NOAH) up 88 percent

With great wealth comes the desire to make even more of it, and Noah Holdings (NYSE:NOAH) appears perfectly positioned to help China’s newest millionaires amass even more cash.

First off, this disclaimer: Noah Holdings Limited (NYSE:NOAH) is one of the biggest holdings in my portfolio right now. A wealth management company that serves high-net-worth individuals in China, Noah released 4Q earnings last night. Analysts were spot on with their calls. The company reported $0.09 earnings per share, which met the Thomson Reuters consensus estimate of $0.09, according to AmericanBankingNews.com.

Net revenues at the company shot up 157 percent from $5.4 million in Q4 2009 to $14 million in Q4 2010. Over that same time span, net income attributable to shareholders rose 88.9 percent to $4.2 million. Those are heady numbers, and so are the company’s expectations for the rest of the year. Noah forecasts non-GAAP net income attributable to shareholders to hit a year-over-year increase in the range of 56.7% and 86.6%.

Analysts are also positive on the stock. JPMorgan Chase & Co. (NYSE: JPM) initiated coverage on Noah Holdings with an Overweight rating and a $22.00 price target last month. Bank of America (NYSE: BAC) analysts currently list Noah as a Buy with a $22.20 price target.

Both targets are more than 40 percent higher than the stock’s current price at $15.43. Apparently, I should have waited to buy my shares, which are down 3.5 percent since opening day, but I’m definitely not worried about the company’s long-term prospects.

There’s much talk about China’s burgeoning middle class, but, if luxury purchasing is any indication, the ranks of the upper class are swelling even faster. A new report by broker CSLA forecasts overall consumption in China will rise 11 percent per year over the next five years. Sales of luxury goods are expected to grow more than twice as quickly, by 25 percent a year.

“The wealth of China’s upper-middle class has reached an inflection point, reckons [the author of the CSLA report] Mr. Fischer. They have everything they need,” The Economist writes. “Now they want a load of stuff they don’t need, too.”

With great wealth comes the desire to make even more of it, and Noah appears perfectly positioned to help China’s newest millionaires amass even more cash.

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Buffett trims fat from portfolio (BAC, NKE, FISV, LOW)

Interestingly, Berkshire wasn’t the only investment company to shift capital out of banks. Trian Partners made the same bet in order to focus on food stocks.

We got a glimpse at Warren Buffett’s recent investment moves with Berkshire Hathaway Inc.’s (NYSE:BRK.B) 13F filing, which details the company’s stock trades through the end of 2010. Most notably, the Oracle of Omaha ditched 5 million shares in Bank of America Corp. (NYSE:BAC).

“He’s closing out a loser,” Jeff Matthews, author of ‘Pilgrimage to Warren Buffett’s Omaha’ told Bloomberg. “We bought it during the crisis. But its earnings power coming out the crisis has been reduced.”

Buffett took a loss of more than 55 percent on the trade after purchasing the shares during the height of the mortgage crisis. Some analysts see the move out of BAC as a sign that Buffett’s cleaning house as he prepares to hand over the reins to a group of successors.

Other positions Berkshire closed out last year:

  • Becton Dickinson & Co. (NYSE:BDX)
  • Comcast Corp. (NYSE:CMCSA)
  • Fiserv Inc. (NYSE:FISV)
  • Lowe’s Companies Inc. (NYSE:LOW)
  • Nalco Holding Co. (NYSE:NLC)
  • Nestle (NSRGY.PK)
  • Nike Inc. (NYSE:NKE)

Berkshire now holds positions in just 25 companies. That’s down from 37 in June, according to NewsyStocks.com. Interestingly, Berkshire wasn’t the only investment company to shift capital out of banks.

Trian Partners, which is headed by widely-followed investor Nelson Peltz, ditched stakes in Bank of America, J.P. Morgan Chase (NYSE: JPM) and U.S. Bancorp, (NYSE: USB), according to BizJournals.com, to make a big bet on food stocks, specifically Kellogg’s (NYSE: K).

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HDFC Bank turns dominant in India’s credit card market (HDB)

HDFC Bank Limited (NYSE:HDB) looks poised to outgrow its peers in 2011 as it captures more of the credit card market and continues to surprise analysts to the upside.

With rising defaults on personal loans in India, the country’s credit card market has undergone subtle but seismic shifts over the past two years, and it’s beginning to look like HDFC Bank Limited (NYSE:HDB) is poised to come out on top. The company defied market expectations last quarter by reporting a 33 percent rise in net profits.

The number of active credit cards in India has tumbled since March of 2008 from 20.75 million to 10.82 million as of November 2010, according to the Times of India. Unlike most domestic and foreign banks operating in the country, though, HDFC has aggressively grown it’s credit card portfolio.

“Industry officials estimate that HDFC Bank is nearing leadership position, followed by ICICI Bank (ICICI Bank Limited, NYSE:IBN) and SBI Cards,” Mayur Shetty writes in the Times. “Although HDFC has been the most aggressive in card issuance, its card customers are predominantly account holders in the bank.”

Rising interest rates and higher commodity prices will likely crimp borrowing going forward, but the Head of Equities at Ambit Capital, Saurabh Mukherjea, expects HDFC to outperform the sector.

“There will be consensus pullbacks in our FY12 economic growth rates and the banking sector will see some pullback on the back of that,” Mukherjea told the Economic Times. “But by and large the higher quality banking names, HDFC in particular, will outperform the rest of the sector as we enter a softer period from an economic growth perspective.”

The Royal Bank of Scotland ranks HDFC highest among private-sector banks in India, according to Reuters. Analysts there have retained a “buy” rating on HDFC, “hold” on ICICI Bank and “sell” on Axis Bank (AXBK.BO).

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