A reputable colleague of mine, when asked if he were going to buy
some US bank stocks, told me the following: "The US banks I'd buy
currently reflect outrageous valuations, based on earnings power and
economic uncertainty."
He said he wants to buy Banks of America ( ) when it gets back to the single digits, JP Morgan Chase ( ) when the stock trades in the low-to-mid $20s and Suntrust Banks (STI) if and when the shares retreat to the low teens.
To
my way of thinking that is how investors reduce risk. They look for
quality, they face the realities such as current valuations and
economic conditions, and they wait until the next good market shakeout
to accumulate.
For my money, I think another way to reduce risk and even increase
potential profits in bank stocks is to diversify among North America's
best publicly-traded banks, and I'm speaking about the major Canadian
Banks.
There are many good reasons why I say this, but nobody has summed it up better than The National Post (NationalPost.com)
which recently ran an article written by Colby Cosh entitled "Canada's
Moment". By virtue of The National Post's generosity I'd like to quote
the heart-and-core of this terrific article. If you are ever
considering investing in bank stocks which pay great dividends, print
their story out and save it.
"As the U. S.
economy approaches what everyone is hoping will be the "inflection
point" at which the major indicators rebound, the international
fetishization of Canada continues. Enjoy it while you can! --
apparently, like some crotchety pioneer grandmother, we have the kind
of stoic, hard-ass virtue that only expresses itself fully in a crisis.
Everywhere, economists are wondering how Canadian banks managed to
avoid most of the crummy securitized debt that is crippling other major
democracies' financial institutions. And they're noticing that our big
lenders held up pretty well through the Great Depression, too. It is
our moment; but do we know exactly what advice to give others?...
Down
south, lenders are engaged in a constant chess game with the
government.
