Last month one of the smartest guys I deal with, a guy who has only made targeted good bets, said to me, "I am buying Banco Santander (STD)." I blanched, and told him all about the problems. He said, "And do you know the guys who run the bank like I do?" I said that I had talked to a bunch of them but the problems are unresolvable as far as I can see.
He laughed. He said that they had developed the ideal strategy of slicing up their overseas banks and creating equity, which, of course, is what is needed. He said that Santander is the best equipped bank in the PIIGS to handle this moment. He said you had to be willing to take stock for the dividend because they are smart and have a game plan.
I laughed inwardly (not outwardly, because the last thing this guy told me was to short Netflix (NFLX) at $260 and he had just covered for about a 200-point gain). He only likes to do one trade at a time, and this time it was STD.
But I did say that I was worried about the government there, the subsidies, the debt, the unemployment, etc.
"And they aren't? And they don't know more than you?"
"So, if you are that are uncomfortable and you know so much more about their business and their country, then maybe you just consider it a call on the turn. Consider it a call on what the smartest bankers other than Deutsche Bank are doing in Europe," and he left it at that.
One month later and I am thinking, "Gee, maybe he's got one of the best calls I have ever heard and there's still a chance to get in."
Recommending a European bank stock? Well, let's see, after buying short-term Italian and Spanish bonds -- the Corzine trade, I am calling it -- is there anything as good as European banks this year? Have you looked at Commerzbank? How about the French banks? These are remarkable moves that people are totally in denial about it.
Now we don't know who has to raise more money right now because they are so secretive, and we don't want to get whacked by a Unicredit-like rights offering, but I think that in 2012, once you have raised the capital, your stock can run.
All that said, I am simply offering this gentleman's view that STD is a great call on the best bank in Spain breaking away from the pack. Call it a call on a situation that I allegedly know more than they do about.
Random musings: Research In Motion (RIMM) can't be worse, might not be better. I remain devoted to Apple (AAPL) and am tiring of the lies about how easy it is to hack -- that's from lazy CTOs who don't want to switch. They bore me.