For 2008 I recommend holding on to these three gold-standard financials: Fannie Mae (37, FNM), Wachovia (35, WB ) and Bank of America (39, BAC ), as well as Washington Mutual (14, WM ) and CIT Group (22, CIT ). As the experience of the 1990s shows, they will have substantial upside once the current fright subsides.
I expect the market to likely end the year flat or down somewhat. A real bear market, which we can define as a 20% decline, is quite unlikely from here.
On the positive side: A recession is not likely. The financial panic will gradually ease as we move into 2008. Investors will crawl out of their fallout shelters. Remember that this is an election year, and the incumbent party will do what it takes to prime the pump. Increased federal spending and more Federal Reserve easing are givens. My high-quality financial stocks will soar once that becomes apparent. Just as they did in the early 1990s, banks will maintain fairly good yields on their assets while their funding costs go down. BofA earned $4.70 a share in precrisis 2006. I think it will earn $5.50 or more in postcrisis 2010.
~ David Dreman, "Tug of War," Forbes, February 11, 2008
Showing posts with label Washington Mutual. Show all posts
Showing posts with label Washington Mutual. Show all posts
May 23, 2008
Bill Nygren still bullish on Washington Mutual
Q: A primary reason the fund is down so much is because Washington Mutual is your largest holding. Why do you still believe in the company?
Nygren: The concern the market has is about its mortgage holdings. But the real attraction of Washington Mutual has very little to do with mortgages. We like its growing strength as a retail bank. When you look at the size of losses it could incur from mortgages, it's not enough to offset all of the value being added on the deposit side of the balance sheet. If you value Washington Mutual with the same kind of premium other banks get for deposits, you get a number that's substantially higher than the current stock price of $37. It's probably worth $50 or $60 per share.
~ Bill Nygren, portfolio manager, $6 billion Oakmark Select Fund, "Straight Talk About Bad Results," BusinessWeek, September 17, 2007
Nygren: The concern the market has is about its mortgage holdings. But the real attraction of Washington Mutual has very little to do with mortgages. We like its growing strength as a retail bank. When you look at the size of losses it could incur from mortgages, it's not enough to offset all of the value being added on the deposit side of the balance sheet. If you value Washington Mutual with the same kind of premium other banks get for deposits, you get a number that's substantially higher than the current stock price of $37. It's probably worth $50 or $60 per share.
~ Bill Nygren, portfolio manager, $6 billion Oakmark Select Fund, "Straight Talk About Bad Results," BusinessWeek, September 17, 2007
Subscribe to:
Posts (Atom)
