There are many people out there on the street that still won’t touch large globally diversified financial stocks. Just a couple weeks back, the markets marked the first anniversary of the credit crisis. That year has been marked by red— lots of losses forcing many of the largest titans of Wall Street to raise tens of billions in fresh capital, not to mention countless cuts in head count and dividends paid to shareholders. Shares of many of the well-respected such as Merrill Lynch, Citigroup, AIG, Bank of America, UBS and many others have seen their share prices halved since the start of the year, many on this list have seen more than that chopped off their market values.
But as a seasoned investor I see value in many of the names listed and countless others not mentioned. There are many reasons why I believe that to be the case. But I ask myself one simple question? What does Wall Street do best? The answer in its most simple form is making a whole lot of money. Even though the total losses announced by many of the banks and investment firms could potentially top $800 billion when all said and done (Global firms included)
Even though I see value, I fully see the chance that financial stocks could trade even lower than current levels. That is of course the nature of the markets and the individuals that make them up. Nothing is impossible on Wall Street. With that said however since I see value I have been adamant that financial stocks will one day rebound. For the better of two-three quarters I have been buying bank stocks, and averaging down when they fall. I am a long-term investor who knows in the end that Wall Street always wins. The Citigroup’s and AIG’s of the world will one day soon regain their golden luster and be bonanza’s to shareholders. 200-300% returns are not impossible in many of the beaten down global giants.
Markets and policies will evolve to better accommodate the companies that have a vested interest in the game. Even though Wall Street is stuck in the infirmary, in time it will be running free doing what it does best—making piles of money. New financial instruments will be created by the geniuses of the financial world, consumers will once again open up loans and take out credit cards, and the housing market will turn for the better. Domestic economic growth will show an uptick and the emerging markets that helped fuel an unprecedented level of growth in such markets as China and India will continue to dazzle, even though there will be pitfalls along the way.
In the end, long-term investors willing to withstand near-term financial turmoil I feel will be richly rewarded. Warren Buffet, the legendary investor recently said that sometimes the stock market god’s throw you a once in a lifetime opportunity, it is wise to seize cheap and quality companies. Even though Buffet is not gung-ho over bank stocks, I see some mega banks as screaming buys.
* Full Disclosure: Long shares of Bank of America, Citigroup, AIG,
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