‘These Are the Stocks We've Got to Focus On': Three Market Analysts Cheer Big Bank Earnings and Flag Their Top Picks

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Big banks have had a blowout start to earnings season.

The group's stronger-than-expected reports have "astonished" longtime Wall Street professionals such as CNBC's Jim Cramer.

Here's what he and two other market analysts said investors should be watching:

Cramer, the host of "Mad Money," highlighted one name in particular:

"What I am astonished by are these bank earnings. They are at another plane. And if we do get what everyone thinks we're going to get, which is that [Federal Reserve Chairman] Jay Powell is going to be forced to give us a rate hike, the leverage of these companies — I've got to tell you, none of these companies is expensive. Not one of them. And JPMorgan, ... what a buy. I mean, come on. They did an amazing quarter. And I just think that these are the stocks we've got to focus on. You can put Coinbase up in there. I don't mind. Cathie Wood says it's OK."

Tiffany McGhee, CEO and chief investment officer of Pivotal Advisors, also had her eye on JPMorgan:

"There's a difference between these banks. And especially when it comes to JPMorgan and Goldman Sachs — these guys have diversified revenue, consistent dividends. I'm looking at these, and I've actually viewed these as real staples in our client portfolios for quite some time, when you look at what they did last year, not cutting their dividend in a time of real stress, when you look at what saved them in terms of revenue last year, their diversified income, trading revenue, also some asset management revenue and advisory revenue. And we've seen that continue with these blowout numbers versus a bank such as Wells Fargo that's just so heavily relying on their consumer banking. So, just a little bit tricky. So, I really feel like with these particular banks that the line between defensive and cyclical stocks is really blurred right now. It's really hard to tell."

Sarat Sethi, managing partner at Douglas C. Lane & Associates, agreed about JPMorgan's strength versus its peers but was also watching names with near-term potential:

"Like Tiffany, I like JPMorgan. They're the gold standard. They have a diversified asset base, no question on that. But what I'm looking for is who's going to give me upside in the next two to three years, and I think the company you want to look at is Morgan Stanley. They've really restructured their whole business. Their asset management business is going to give them huge leverage, and I think that's where you want to be. The issue that you have with some of these other banks is the trading revenues really don't get the valuation going forward, because the market looks at it one time. So, you want recurring revenue, and you want earnings that are going to grow through the recurring revenue. And by the way, JPMorgan has a huge asset management business to that. So does Morgan Stanley. Bank of America is going to be having a higher beta for you because the question that I have for them is what is your loan growth going to be coming forward? That's really where they have the leverage, and a lot of that has to be dependent on the economy and the way things are going, especially with the consumer economy. And if businesses start expanding, Bank of America will have, in the short term, higher upside."


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