The "big 4" bank stocks, anyone buying?

[Snidely Whiplash]

Quote:

Originally Posted by clifp I saw my income slashed as bad as the stock prices, and unlike share prices which have staged a decent recovery my dividend income hasn't.

I was fortunate to have access to other funds to carry me for a few years when the dividend cuts came. I hope you were too.

I sincerely feel for anyone who was fully invested and living on dividends from these companies when the cuts hit. At that point they could only sell off shares for income, shares that have already, as you pointed out, drastically declined, and the shares would have been sold off at a drastic pace, thereby leaving them with no chance to ever recover the lost dividend income. Truly devastating for some.

[Moscyn]

I have JPM and HSBC stocks and am keen on adding more of the latter. Nothing wrong with JPM but I think I have enough exposure for that stock.

[Zathras]

Quote:

Originally Posted by Snidely Whiplash I was fortunate to have access to other funds to carry me for a few years when the dividend cuts came. I hope you were too. I sincerely feel for anyone who was fully invested and living on dividends from these companies when the cuts hit. At that point they could only sell off shares for income, shares that have already, as you pointed out, drastically declined, and the shares would have been sold off at a drastic pace, thereby leaving them with no chance to ever recover the lost dividend income. Truly devastating for some.

I would fear for anyone that concentrated in the financial stocks. Good diversification is the key.
Many dividend payers did not cut their dividends and quite a few continued to raise them.

[heyduke]

Quote:

Originally Posted by heyduke ...added 1k of sbib here at 4.89

sold at 5.09...

[Snidely Whiplash]

Quote:

Originally Posted by Zathras I would fear for anyone that concentrated in the financial stocks. Good diversification is the key. Many dividend payers did not cut their dividends and quite a few continued to raise them.

I dont know that I would necessarily categorize GE, DOW, and PFE as financial stocks. As for the others I mentioned in a previous post to this thread, you are correct.

[heyduke]

GE capital is big time financial - I agree on the other two...

[Zathras]

True, I wouldn't put DOW or PFE in the financial category either.
Stocks such as MMM, JNJ, PG, LLY continued increasing their dividends right through the recession. I wonder which is more typical?

[clifp]

Quote:

Originally Posted by heyduke GE capital is big time financial - I agree on the other two...

Ya but you can't buy stock in GE capital only GE. The vast majority of GE revenues are non-financial so Plenty of non-financial companies cut dividends in the last few years, Ford, GM, BP, Frontier Communication, and MLP I own Crosstech energy. All have cut dividends.

[BUM]

Quote:

Originally Posted by BUM Assuming things will get doomier and gloomier before getting prosperous and sunnier, I'm buying SKF

[BUM]

Quote:

Originally Posted by BUM

[wildcat]

Just to add some more meat to the thread, I am pasting Francis Chou's recent comments in his Q report. He is well known in Canada as a solid value investor and his fund has a great 15 year record.

His interest mostly seems to be the warrants and notes why (link below)

http://www.choufunds.com/pdf/SA10%20pdf.pdf

Well, starting in 2007, financial institutions went through a cataclysm. Directly or indirectly,
almost all of them had to be bailed out by the U.S. government. Looking back at the crisis, this is
what we have observed:
1) The U.S. government will not let major financial institutions fail.
2) The financial institutions that survive will be the ultimate beneficiaries of any recovery in the economy.
3) Interest rates will be kept at artificially low levels for the foreseeable future. The spreads
between what the banks are paying for deposits and borrowings in the market (like FDIC
insured), and what they can lend at is enormous. After being severely burned, they have tightened their lending criteria and have been extremely cautious with their lending practices. In general, the quality of loans now being made are quite high and for the first time in many years, banks are being paid handsomely according to the risks they are taking.

4) Financial institutions in general are hoarding capital. This will provide them with ample
cushion to absorb losses if a double dip recession were to occur.
5) The books of financial institutions were carefully examined by all kinds of government
agencies, including regulators, before the government allowed them to repay the U.S. Treasury under the Troubled Asset Relief Program (TARP).

6) Most of the big banks are selling below 10 times their potential earning power in the future.

Risks <snip>

6) Even so, everything is not hunky dory for the banks. Banks face many issues and
challenges. I have listed a few here:
a) We still do not fully understand or trust the numbers
b) Financial regulatory reform may reduce earning power
c) New Basel rules may require more capital and reduce profits
d) There may be a double dip recession
e) The unemployment rate may go higher and create more defaults
f) Commercial real estate prices may fall dramatically
g) Banks are still not marking loans in their books properly
h) Residential real estate prices may fall further
i) States and municipalities are in bad shape
Our investing horizon is long-term - eight years or more for these bank warrants. Over that
period, we believe the odds are it will work out to be decent investment - more so for the better capitalized banks. We view it as the glass being more than half full rather than being more than half empty.

[okapi]

Bruce Berkowitz of the Fairholme Fund was on WealthTrack last week.Hes over 60% financials in his fund.He was mutual fund manager of the decade for whats it worth.