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Avoid the 'Too Big to Fail' Banks: Stock Picker

Monday, 22 Nov 2010 | 11:08 AM ET

Where should investors be putting their money? Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, and Joshua Strauss, portfolio co-manager at The Appleseed Fund, shared their best investment ideas.

The Case For Financials:

“As we look at the bank stocks, we like Citigroup because it troughed in the first quarter of 2009 when it went below $5 a share, and the market of the market itself troughed at the time,” Wirtz told CNBC.

“Since then, the market’s almost doubled in price but Citigroup remains below $5.”

Why You Must Avoid Financials:

Meanwhile, Strauss said he is staying away the financial sector “almost entirely.”

“We avoid all of the ‘too big to fail’ banks and we find that the gains of these banks go to the employees first and then the shareholders. And the losses are being taken by the taxpayers,” he explained. “Given the systemic risk in the big banks, ones that have more than $10 trillion in derivative exposure, we have no interest in owning that sector right now.”

What to Buy Instead?

Instead, Strauss advised investors to look into the health care sector for better returns.

“Certainly, there’s plenty of headwind in health care with regards to the regulatory uncertainty and patent expirations. But in this defensive sector right now, you’re looking at rock-bottom valuations,” he said.

Strauss Favors:

Pfizer

Novartis

PDI

Johnson & Johnson

Albany Molecular

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Scorecard—What He Said:

  • Wirtz's Previous Appearance on CNBC (Oct. 25, 2010)

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More Market Analysis & Opinion:

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CNBC Data Pages:

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CNBC Slideshows:

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Disclosures:

No immediate information was available for Strauss or Wirtz.

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Disclaimer

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