Tags: Smead | Financial | Stocks

Smead Capital: Buy Financial Stocks Now

Wednesday, 19 Oct 2011 08:33 AM

Despite their lackluster earnings and plunging stock prices, financial stocks are way oversold, and the wise investor should snap them up now, says Bill Smead, CEO of Seattle-based Smead Capital Management.

Smead tells CNBC that U.S. financial stocks are above all else "deeply
undervalued."

"The second thing is ... we feel like we're getting close to the end of that down-swing because the people that are overweight financials are paying a very, very stiff price for it right now," he says.

"If you have a three-to-five year timeframe, and you're buying the Wells Fargos of the world here, at maybe six times normalized earnings, in three years you're going to feel great, even though you might have been sick to your stomach for the next couple of months."

Not all fund managers are as optimistic, pointing out that weak loan demand and regulatory uncertainties are keeping them away from financials.

"The thing is with a credit crunch, we learned this with Lehman, things can get a lot worse, and these falling knives can be really treacherous. So we continue to err on the side of caution with financials, even though it is a crowded trade, we admit," says Alec Young, chief global equity strategist with U.S.-based S&P Capital IQ, CNBC adds.

Bank officials say global uncertainties are hurting business.

"The economic recovery has been more sluggish and uneven than anyone anticipated," says Wells Fargo Chief Executive Officer John Stumpf, according to Bloomberg.

"We can't change the economic environment, yet we have worked hard to control the variables we can."

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Despite their lackluster earnings and plunging stock prices, financial stocks are way oversold, and the wise investor should snap them up now, says Bill Smead, CEO of Seattle-based Smead Capital Management. Smead tells CNBC that U.S. financial stocks are above all else ...
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2011-33-19
Wednesday, 19 Oct 2011 08:33 AM
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