Dick Bove: European Crisis is a Bonanza for American Banks
On Monday widely followed Dick Bove told us that he was wrong about banks - that they’re probably not going higher.
But he also says, they should.
When speaking about the weakness in a live interview on Fast Money, Bove told us bank weakness was “not because of fundamentals – in each of the past 9 quarters, bank earnings have been up year over year. And Q3 was best in profits in more than 4 years.”
Then, why are bank stocks going down?
Bove's thesis is simple; he thinks investors are so freaked out about banks that they’re selling for no rational reason. In other words, psychology is driving bank stocks because of fears related to Europe, housing, economy, regulation and more.
But “it’s not the fundamentals – they’re getting better and better and better,” Bove says. In fact he thinks investors are missing a big bullish catalyst - that the crisis in Europe is actually good for US banks.
”People are worried about how the American banks are going to be hurt by the European crisis but it’s actually bonanza for American banks,” Bove says.
"Over the past 4-5 months we’ve seen changes in the movement of funds – deposits are flowing into American banks from Europe. And we’re seeing loans being sold by the European banks to the American banks at distressed prices. And we’re seeing customers shift from Europe to American banks. And American banks are delivering better than expected earnings as a result," Bove explains.
All told, banks stocks should be going higher. And if you’re looking for a play Bove suggests long Wells Fargo.
”Wells Fargo is one of the best banks in the United States and buying this stock at current prices makes an enormous amount of sense," he says.
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Trader disclosure: On Nov 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Weiss Long EUO; Weiss Long QCOM; Weiss Long NFLX puts; Weiss Long HPQ stock; Weiss Long DE Stock; Weiss Long MDRX stock
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