says Richard Pzena.
In brief, the subprime mortgage and liquidity crisis has sent investors into panic mode about financial stocks, driving their prices far below their underlying value. Major firms with strong franchises have fallen precipitously, despite their historical records.
A bubble not unlike that seen with internet stocks in the late 1990s seems to have formed, with energy, commodities, and industrial cyclicals being bid up with little regard to earnings. Indeed, the spread in valuations between commodity and financial stocks is wider than at any time in the past 55 years, and financials represent one of the most compelling investment opportunities we have ever seen.
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