How to Find Lucrative Financial Institution Stocks

Companies who avoided danger are an attractive option

investdollar_HOMEThe recent economic and stock market meltdown started with the implosion of a handful of big banks and Wall Street brokerage firms. And the financial sector continues to feel the pain. Shares of Citigroup (NYSE: C), for example, traded at more than $55 a share in mid-2007 but sell for less than $3 now. American International Group (NYSE: AIG), once considered an outstanding insurance company, has seen its stock plunge by 96% in the past 12 months.

Shell-shocked investors are fleeing financial stocks in droves. Intuitively, that means the industry is now a place to look for bargains. Surely there must be banks, brokers, and insurers who avoided the traps that snared the big players. Finding them, though, isn’t easy. “Shifting through the data can be complicated,” says Anton Schutz, manager of Burnham Financial Industries Fund (BURFX). “Your best chance is to invest through an actively managed fund, where someone is picking stocks. If you buy a financial exchange-traded fund (ETF), which tracks an index of financial stocks, you’re buying bad companies as well as good ones.”

In general, actively managed mutual funds haven’t been as hard hit as Citigroup or AIG. Still, according to fund tracker Morningstar, specialized mutual funds lost nearly 44%, on average, in 2008. Schutz’s fund is an exception, though: it lost only 7% in 2008, followed by a gain of nearly 13% in the first half of 2009. Under Schutz’s guidance in 2008, Burnham Financial Industries Fund received the Lipper Performance Achievement Certificate for posting the best record out of 91 funds in its category.

So what is Schutz holding now? “Among the major banks, we see opportunity in Bank of America (NYSE: BAC). When things get back to normal, the company could earn as much as $4 a share. It’s trading at [more than $12] now, so the stock could double or triple in the next couple of years,” Schutz says.

Bank of America isn’t the only financial institution Schutz likes. He’s touting smaller players like People’s United Financial (NASDAQ: PBCT), which has branches throughout the Northeast, and TFS Financial Corp. (NASDAQ: TFSL), parent of Third Federal Savings and Loan Association of Cleveland. “These are among the banks that have excess capital now,” says Schutz. “They’re buying back their own stock because the values are so compelling now. And they might be able to make acquisitions, too.”

Historically speaking, savvy investors like to buy shares in institutions that are likely to be taken over by larger firms. Given the state of the financial industry today, says Schutz, “the winners might be the buyers.” Acquirers know the industry, the logic goes, and are likely to know which companies represent good value at currently depressed prices.

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  • tamiko scian

    fyi

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  • WALTER WEBB

    THE GLOBAL FINANCIAL MARKET HAS REALLY PROGRESSED AND THE COMPETITION
    IS HEATING UP. THE UNITED STATES HAS BEEN A LEADER OF THE FINANCIAL FREE
    WORLD AND HAVE PARTNERED WITH A PLETHORA OF COUNTRIES. WELLS FARGO ADVISOR
    (WFC) HAS GENERATED LOCAL AND GLOBAL PROSPERITY THROUGH ITS ADVISORY NETWORKINGS. BANK OF AMERICA (BAC) HAS ESTABLISHED ITSELF AS AMERICA’S 2010-2011 ACQUISITION FINANCIAL INSTUTION IN THE UNITED STATES. DOMESTICS
    AGENDA WAS PRIORITY ONE AS IT ACQUIRED COUNTRYWIDE AND MERGED GLOBALLY WITH LASALLE IN EUROPE. MECHANICS AND FARMERS BANK (MFBP) HAS BEEN RECOGNIZED AS A LEADING FINANCIAL HUB FOR AFRICAN AMERICANS. IT WAS A SPONSOR TO EARLY BLACK WALL STREET AND THE FINANCIAL FREEDOM OF BLACKS IN
    OWNERSHIP ROLES OF AMERICAN ECONOMY. CITIGROUP (C) WITH ITS RECENT NEW AFRICAN AMERICAN CEO HAS PUT AMERICAN EDUCATION FINANCING TO THE FOREFRONT
    OF EDUCATION MAKING THE UNITED A INTERNATIONAL PLAYER IN HIGHER EDUCATION.
    AND WHILE STILL SUSTAINING ITS TIES WITH GLOBAL FINANCIAL VENTURES IN HUGE
    AMOUNTS OF COUNTRIES. ICCI BANK (IBN) HAS PARLAYED ITS FINANCIAL MOVES INTO PARTNERING WITH INDIA’S BIG WIGS WHOM ARE GENEROUS SPONSORS OF AMERICA. THE NATIONAL BANK OF GREECE (NBG) IS LISTED ON THE NEW YORK STOCK
    EXCHANGE (NYX) AND WORKS WITH AMERICAN BANKS. KOREA’S KOOMIN (KB) ALSO.