State Street Corp (NYSE:STT)

Hurt buy bank and mortgage problems, which are at bottom.

hope im not too late, this stock still has some falling to do.

Poor Manage. Very poor decision making. Stock heading for s deep dive.

all financials get battered, this one help up great.

As with any investment I make, it's murphys law that once I drop it from my portfolio the stock will take off.

This 'pig' may still be able to find a few truffles. STT mints money in a downward rate environment on their securites lending business. What drives sec lending? Bearish sentiment for one: this encourages borrowers to short stocks held by long term institutional holders that have their securities custodied at STT. These borrowers get paid a reduced rebate rate in a low Fed Rate environment which means thicker gravy for STT. This is just one aspect of STT's varied business in addition to their much publicized(sp?) asset management segment. People seem to forget STT's primary business is selling picks and shovels: they hold and service or 'custody' assets held by other institutions. Sure, in a volatile market custody revenues may be hit, but as long as firms are out there trading and trying to make a buck, STT will be right there selling them picks and shovels (i.e., custody services) in pure Levi Strauss fashion. Also, Soverign Wealth Funds are awash in assets and you can bet STT has been racking up a lot of frequent flier miles.

Regarding the 7-8% pop on the announcment of major problems in STT's fixed income department: tough to read, but the market may well have been astute enough to recognize the competency of a resolute CEO who will excise any potential malignancy with extreme prejudice and put entire divisions on notice that performance is weighed on a risk-adjusted basis; not to mention earnings and revenues topped forecasts exclusive of the charge. Question: How were client investment mandates violated under a competent CEO? Answer: The CEO no doubt asked himself the same question and you can bet it won't be happening again.

The big issue is the potential for STT's SIV liabilities to make an appearance on the balance sheet. STT has huge exposure to these vehicles and if they are unable to fund themselves through short term commercial paper issuance STT is mandated to provide funding via its own balance sheet. Truly a frightening but nevertheless relatively far-fetched proposition as most financial firms will enable a line of credit to add liquidity to struggling funds. If such a line is enabled expect a knee-jerk SledgeHammer of the Gods type smack-down that has short sellers salivating but could provide a steady entry point.

If you plan on investing in STT you had better have your time-frame nailed down tight. This ship might list a bit in the near future, but expect a slow and steady ride as it rights itself from any trouble and returns to its conservative New England upbringing, leaving a steady trail of cash in its wake.

Good and Solid Company

Its already done well. But look for more of the same. STT has no credit issues, benefits from lower rates. It also gnerates a sizeable percentage of its business (approximately 40%) generated from international sources. It makes a lot of its money from foreign exchange as well as money manager outsourcing. Most outsourcing is occuring in interntional markets where STT has a dominant position. While BK merged with MEL, it got bigger in the US.

STT has been doing well while many major banks had disastrous declines.

STT has a lot going for it:

1) STT is more of a "custodian" of money rather than a more risky bank or brokerage. Granted, it has operations in many areas, but it should not be confused with C, MER or other more risky institutions.

2) They have stated that all of their SIV's and other balance sheet (off balance sheet) items are solid. Sure, we could be surprised in the future, but this past quarter was definitely the quarter to "surprise" everyone with any bad news since it was somewhat expected in the financial world. It didn't happen, and they went out of their way to let us know that everything is fine. Could they be misrepresenting things? I don't think so. Why would you waste a perfectly good opportunity to "kitchen sink" everything on the expectant market and risk huge disappointments down the line.

3) Lots of institutions and mutual funds will be buying STT in the next quarter. These investors have to keep a certain percentage in "financial services" since they don't like to take big "sector bets" as they follow the discipline of maintaining "asset allocation" across sectors and industries. STT is one of the few solid financials relative to the brokerages, banks, mortgage companies, etc. Lots of buying will be going on. If you have to keep a certain amount of money in financials, would you be buying STT or C?

4) International exporsure is also a plus as STT increases international revenues. They will benefit from the investment boom in the rest of the world.

5) STT gets paid for "transactions" and for custodial services. Even as the market goes down potentially, they continue to get their fees.

6) Their merger is going better than expected. It is a great opportunity for them to eliminate some "dead wood" and streamline their operations. Being the "big dog" in their industry has many advantages.

7) Earnings estimates have gone up substantially as the estimated dilution from the merger has turned into accreation. STT has historically traded at a PE of 18 to 24 times earnings (not cheap for a finanancial, but deserved for their consistency and solid balance sheet). Using the new estimates for earnings, we could see a share price of about 90 next year with a PE of only 19-20. Granted, this assumes that guidance stays relatively strong as well. Not many financials have increased guidance recently and the potential 15% upside in the stock over the next year is attractive in today's environment.

8) Future rate cuts will potentially improve the prospects of all the financials and STT will be part of the rising tide.

Oh State Street, that great street!

Fed. Reserve dropped rates and half of investiture out of the US.

Better Investin

spec bear

STT is in the process of cutting cost and expences via consolidation throughout the company. I expect their ROE to be in excess of 20%. Also, the additional new busines that is in the works will push this stock over 75 in the next 6 months

STT is still undervalued by historic standards and the price should continue to grow at around 18% annually, outpacing the S&P 500

love that Cramer. Won't be holding this long, though, according to Rule #1: Don't buy and hold, BUY AND HOMEWORK!

Stock to Watch in March 2007 Kiplinger's

State Street Corporation is a financial holding company headquartered in Boston, Massachusetts, and through its subsidiaries, provides a full range of products and services for institutional investors worldwide

The recent quarter has been positive with net interest margin rising by 12 basis points and also the revenue increase 10% year on year. The bank hasn’t had any charge off in the recent years or set aside loss reserves. The bank had controlled its expenses well, which were down by 6% over the previous quarter. It gets less than 1/5th of its income from the traditional banking avenues and is not affected by the credit exposure or interest rate fluctuations. However the securities lending business would profit from reduction of overnight rates. Loan’s form 8% of the assets and are towards processing customers to facilitate trade which are backed by collateral.

Geographically the bank derives 41% of its income outside US and has greatly increased the European presence with the acquisition of Deutsche Bank custody services. The management expects future growth opportunities to be in the area of operations outsourcing, alternative investment services, equity execution and quantitative active services. The fortune of the bank is highly leveraged on the capital market operations and derives 2% income growth for every 10% increase in Standard and Poor’s 500. The bank is going on the right track with increased custody flows, generating new business, appreciation of global equity markets, improved efficiency and is all set for a bull run.