- Banks have had nice moves higher over the past year, but nicer still were the moves in the TARP warrants.
- To review, as part of the TARP bailouts during the financial crisis, the government received warrants on lenders' common stock. The Treasury began selling these warrants in 2009, providing bank bulls with a leveraged way to play the recovery.
- "If the subprime credit-default swaps were this asymmetric, beautiful investment to express what was wrong with American capitalism…, these securities are the opposite,” says one hedge funder, whose firm bought about $200M of Bank of America's (NYSE:BAC) TARP warrants. BofA is higher by more than 50% since the 2016 election; the TARP warrants are up more than 200%.
- Similar moves are being seen in Wells Fargo (NYSE:WFC), JPMorgan (NYSE:JPM), and PNC Financial (NYSE:PNC), among others. An investment in the warrants of Zions Bancorp (NASDAQ:ZION) in 2013 is up 740% since vs. about a 150% rally in the common stock.
- Now read: PNC Financial Services Presents at 36th Annual BancAnalysts Association of Boston Conference - Slideshow
Original article