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Bad News Already Baked into Financials: Stephanie Link

Between JPMorgan’s trading loss and Moody’s downgrades, there are plenty of reasons to steer clear of banks right now. But top trader Stephanie Link, director of research at TheStreet, thinks avoiding them all would be a mistake.

With earnings coming early at the start of the second quarter, Link said weak capital market activity in the financial space has led analysts to lower estimates on a slew of company earnings. But it’s worth noting that going into 1Q, stocks were up 20 percent and are now down 7.5 percent going into 2Q, “so a lot of bad news [has already been] baked in.”

She added that stocks are cheap, balance sheets are getting stronger and loan growth has improved over the last several quarters. She expects to see even more loan demand soon.

Link said investors would face tough capital markets throughout the summer, but suggested these four stocks would make attractive buys based on some key catalysts.

She recommended JPMorgan because chairman and CEO Jamie Dimon forecast a positive quarter and the stock has yet to bounce back from when he made that announcement. Last week, The New York Times reported JPMorgan may have accrued $9 billion in derivatives trading losses, but sources tell CNBC's Kate Kelly that the firm was more likely to have lost between $4-6 billion.

Link also said she liked the regionals like SunTrust — since Morgan Stanley upgraded this housing play today — but said not to buy in the green and to wait for a pullback instead. She also offered up U.S.Bancorp and said she would take a look at AIG if it falls below $30 — since the stock is trading cheap at 0.5 times its book value.

Posted by CNBC's Kirsten Chang

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CNBC.com with wires.

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