Blog > Investment Strategies > Blog article: Financial Sector Plays
 | Email This Article Email This Article  | 

Financial Sector Plays

Posted April 28, 2008

Horacio Marquez sees a bright future for finanical stocks as investment banks recover and the market returns to normalcy.

by Horacio Marquez,editor, The Money Map Report

Baltimore — (TFN): The following was taken from the Money Morning video on TFN. Watch this video.

Financials in the U.S. have gone through a very, very significant markdown. We have seen Bear Stearns taken over by J.P. Morgan Chase and we have also seen incredible pressure applied to the stocks of many investment banks.

At the crux of this situation is the valuations of mortgage-backed securities. Because of the Sarbanes-Oxley regulations, these securities have been marked down below their technical market prices by investment banks.

Rather just watch the financial video? Click here.

That is, the top management of these investment banks have been extremely cautious in marking them down in order not to violate the law.

In coming months, we should see the reversal of many of these markdowns as some of those positions are able to be sold off at a profit by these investment banks. In addition to that upside, we have at this point a market that is overly short in those securities and the fed that has stepped in — together with the U.S. government — in order to prevent the spreading of the contagion of this run on the investment banks.

I believe that these actions are very appropriate and will have the desired affect. In addition to that, Wall Street has marked down the earnings of the entire financial sector quite dramatically. We have seen how Leman Brothers and Goldman-Sachs recently reported beating earnings estimates.

This situation in the coming months should proceed in a similar fashion as investment banks recover and the market returns to normalcy. At these valuations, financial stocks are extremely attractive. An excellent way to play them is to play the financial ETF (XLF:AMEX).

We have pointed recommendations to play specific financials in The Money Map Report and Money Map VIP Trader, but again, for an easy way to play them, buy XLF.

______________________________________

Profits Are Up 1,056.2% for This Wisconsin Company

Commodities are on a tear — and so is mining equipment. This “pick-and-shovel” company has already sold out two-thirds of its equipment for 2008. Australia, Canada and China are battling for orders. And the Street hasn’t figured it out yet. All the details are in our Power Plays Research Report: Read the full report here.

______________________________________


Related Articles


Posted by Horacio Marquez · Filed Under Investment Strategies 

Comments