Credit Suisse Asking Shareholders to Get Aggressive

“We have Credit Suisse trading down by 2%. It’s had a strong start to the interestingly enough, it will ask shareholders for the right to raise money to go on the acquisition trail. Much more aggressive town out of Credit Suisse today.”

Credit Suisse Group (CS) and Deutsche Bank (DB), two of the largest banks of the Eurozone, separately announced today that the start of 2009 has been strong for both companies. Interestingly, even as Credit Suisse affirmed that operations are going well, they are asking shareholders to allow capital raise perhaps through secondary offering. The intended purpose of the funds is not to shore up the balance sheet, but to go after some of the acquisition opportunities in the market. The market, at least at this point, is unimpressed at shares are off nearly 7% as the broad market is about even.

Credit Suisse GroupThere is no denying that the market has started to show signs of strength, recently fueled by the Treasury’s toxic asset purchasing program. However, there are still quite a few risks in the market as many of the fundamental problems are still being unwound. This is likely a correction from an oversold correction, and this correction has seen some serious volatility to the upside, while volume has been relatively low. So, we think it would be much more prudent for Credit Suisse to be cautious of biting off more than they can chew because the evidence of overall economic improvement is still sketchy at best.

Credit Suisse, like many financial stocks, looks Undervalued compared to some historical norms, but that does not necessarily mean that this is a good time to invest in CS shares. When looking at the stock from a price-to-sales basis, CS is actually trading above the historically normal range. We would like to see CS bring earnings back to positive before we could recommend buying shares.

If shareholders do indeed approve a capital raise, it will be very interesting to see just how aggressive Credit Suisse will be. Credit Suisse management has done some interesting things in dealing with this downturn, notably offering illiquid securities to employees as bonuses(Salaries and Traditional Bonuses on the Retreat), and in this case, they hope they have spotted the bottom and be agile to take advantage of it.

Credit Suisse Asking Shareholders to Get Aggressive

About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

We utilize this straightforward approach to value over 5500 securities, with key emphasis given to the study of individual securities' price-to-sales, price-to-cash earnings and other historical valuation ranges. Our long term value investing methodology is powered by the teachings of Ben Graham and it has proven to be very adept at identifying stock prices that are out of line with fundamental factors.

Ockham Research provides its research in a variety of forms and products including our company specific reports, portfolio analytics tools, newsletters, and blog posts. We also offer a white labeling research solution that can give any financial services firm their own research presence without the time and cost associated with building such a robust coverage universe of their own.

Be the first to comment

Leave a Reply

Your email address will not be published.