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The downturn in the financial markets
has meant that some types of stocks are
now trading at fire-sale prices. Which
group of stocks could generate gains in
excess of +50% if they return to their
average five-year earnings multiples?
A.) Tech
B.) Financials
C.) Energy
D.) Restaurants
E.) Retail |
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Published:
June 16, 2008
The
correct answer is 
(B.) Financial
Following what some have called the
worst downturn in the financial
markets since the Great Depression,
dozens of blue-chip financial
companies around the world are now
trading at fire-sale prices. Just a
return to the average earnings
multiples (let alone a premium)
these stocks have commanded over the
past five years would mean
widespread gains of +50% or
more.
You might call it brutal, punishing,
or even devastating -- but no matter
how you describe it, the massive
sell-off has been one for the record
books. Luckily, the sharper the
sell-off, the greater the buying
opportunity. After all, we're not
talking about a collection of shaky
tech companies with uncertain
business models and murky outlooks,
but the very backbone of the
nation's economy.
Bank of
America (NYSE: BAC), for example,
has a coast-to-coast network of over
6,000 retail bank branches and
controls more than $800 billion in
deposits, or about 10% of the
nation's total. And Citigroup (NYSE:
C), one of the hardest-hit firms,
has over 200 million customers and
$1 trillion in assets. Its 2006
profit of $21 billion is greater
than the entire GDP of more than 100
different countries.This
financial housecleaning has left many of the
world's largest and most iconic
financial institutions trading at
valuations rarely seen.
And exchange-traded funds are one of
the best ways to play this
undervalued sector, ETFs take the
guess work out of picking which
banks will turnaround and which ones
will go bust. Fortunately, Nathan Slaughter
has picked two the best funds in a recent issue of
ETF
Authority newsletter. In it, Nathan
offers an in-depth look at the
financial sector, and
dissects two well-placed ETFs that
are ready to roll when the market
heats up again. To learn the names
of these funds, and to learn more
about
ETF Authority newsletter,
please
visit this link.
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The Next 437 Banks That Could Fail
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