15 top stock picks from star investors

U.S. Bancorp
15 best stocks usb

Tim Hartch
BBH Core Select

Ticker: (USB, Fortune 500)

Small and large pick: Large-caps

Most banks are complicated. U.S. Bancorp has thrived by keeping it simple. Tim Hartch, whose $3.5 billion BBH Core Select fund (BBTEX) has returned 6.4% a year since 2007, easily besting the S&P 500's 1.4% annual return, is impressed by U.S. Bancorp's straightforward business model. Instead of relying on trading and investment banking, he says, it makes money the old-fashioned way: collecting deposits, issuing loans, and managing people's wealth. "If the regulators could have their wish," he says, "all banks would look like U.S. Bancorp."

The country's fifth-largest bank isn't immune to its sector's challenges: new regulations and record-low interest rates (which compress profits, since banks can't charge much for loans). But it is insulated by its sizable payment-processing business, which helps retailers handle electronic transactions. "It's a nice earnings stream that doesn't require a significant amount of capital," says Hartch. Of all the big commercial banks in the country, he adds, U.S. Bancorp reaps the highest return on equity and the highest return on assets. Yet with a P/E of 11.8 times trailing earnings, it trades below the (already low) sector P/E of 12.6.

--M.K.


- Last updated December 07 2012 12:34 PM ET
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