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Financials Will 'Vastly Outperform' S&P This Year: Portfolio Manager
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CNBC.com Writer
Is now the time to invest in banks? Michael Farr, president of Farr, Miller & Washington and a CNBC contributor, and Anton Schutz, portfolio manager at Burnham Financial Industries Fund, discussed their outlooks and stock picks.
“We’re seeing good signs, we’re seeing things thaw and improve,” Farr told CNBC. “The balance sheets have improved dramatically…but I’m limiting my ownership to just a couple and I’m staying underweight banks right now.”
Farr’s bank picks include JPMorgan [JPM
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], Goldman Sachs [GS
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] and BB&T [BBT
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].
Although banks will be fine in the future, investors still need to be cautious in the near-term, warned Farr.
“They’re still not making money and we have some significant bumps that banks need to get over,” he explained.
“I’d like to see them return to profitability, grow their earnings, see results of that yield curve make a big difference, and get through a Fed tightening—and still see that they are able to make money,” Farr said.
Schutz' Counterpoint:
On the other hand, Schutz said banks are a “generational opportunity now” from an investment perspective.
“They’ll vastly outperform the S&P this year and I think they have a lot of low-hanging fruits here,” he continued.
Schutz explained that the valuations of the banks are trading at a deep discount to where they previously were.
He told investors that Citigroup [C
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] has "great upside" in the long term. However, he advised against companies that have yet to repay TARP and raise capital.
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The WaMu [WAMUQ
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Financials — More Investor Insights:
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Disclosures:
Farr owns shares of JPM, GS and BBT. Farr, Miller & Washington owns all three stocks in client accounts in Touchstone Capital Appreciation Fund.
No immediate information was available for Schutz or his firm.
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