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1 Reason Some Investors Avoid Banks

Monday - 4/1/2013, 8:04pm  ET

When buying a stock in most sectors, looking at its price-to-earnings ratio can be a quick and easy way to get an idea of how cheap or expensive it is compared with other stocks in its industry. With the big banks, however, the P/E ratio can often fall completely flat on its face and give investors an utterly incorrect picture of what the stock is worth. In this video, Motley Fool financial analysts David Hanson and Matt Koppenheffer talk about why the P/E is so misleading when looking at big banks, and where you should actually be looking.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.