Financial stocks have languished for months amid revelations of bad mortgage bets and concern about recession. Money managers increasingly disagree about whether the sector remains too risky for investors to wade into, or has become ripe with cheap names poised for a rebound.
"The financials really aren't a big area for us. A lot of the stocks we're looking at are still in pretty defensive sectors," like healthcare and consumer staples, said Bob Millen, chairman of Jensen Investment Management in Portland, Ore. He says the firm lately has stayed away from downtrodden financial names like Dow component Citigroup despite the fact that they fit certain data-based criteria that Jensen uses to do its initial screening of potential names to buy.
"We just feel like we can't understand the business well enough," in part because of complicated mortgage investments Citigroup holds, said Mr. Millen.
Randy Bateman, chief investment officer at Huntington Asset Advisors in Columbus, Ohio, is more bullish on the sector, which he believes investors have discounted too deeply.
"Everyone got punished in the initial wave of concern about what's on these companies' balance sheets," said Mr. Bateman. "But as the details emerge, if some of these guys haven't had write-downs yet, you start to think it's not going to happen."
225 mortgage lenders have imploded.
$100 billion has been written off on balance sheets
At some point the financials will be ripe for bottom fishing. But it isn't now.
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