Bank stocks may look like a bargain, with prices for those of the biggest institutions near 52-week lows. But experts aren’t convinced, The New York Times reports.
Hedge fund heavies John Paulson and David Tepper are dumping some of the shares they previously accumulated.
Tepper, head of Appaloosa Management, has shown near-perfect timing. He bought bank stocks near their lows of the financial crisis in late 2008 and early 2009.
Then in the first quarter of 2011, he dumped about a third of his positions in Citigroup and Bank of America, The Times reports.
And since then the KBW Bank Index has lost 8 percent, compared to 2 percent dip for the Standard & Poor’s 500 Index.
Paulson and Tepper aren’t the only bears.
“I haven’t seen investor sentiment this bad in a long time,” Jason Goldberg, a veteran bank analyst at Barclays Capital. “Not owning the group has been the right call, and people are skeptical about getting back in.”
With the banks suffering losses on real-estate related loans that won’t go away, the future doesn’t look pretty.
The weakness of bank shares represents a drag on the stock market as a whole, experts say.
“The financial sector is an integral underpinning of the economy, and it’s going to be very difficult to get a continuing rally without participation from the financials,” Alan Gayle, senior strategist at RidgeWorth Investments, tells The Wall Street Journal.
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