Traders, buying the dip in Schwab, are finding value in the beaten-up financial sector

Published Tue, Mar 21 20232:09 PM EDTUpdated Tue, Mar 21 20233:02 PM EDT

Some traders are using the recent pullback in financial stocks to scoop up shares of what they call quality names at bargain prices. That includes Charles Schwab , down 23% this month, as turmoil rocks the broader financial sector, especially hitting regional banks. But Hightower Advisors' chief investment strategist and portfolio manager Stephanie Link is capitalizing on the pullback to buy what she views as "blue chip quality" names trading at fire sale prices. "I think they're throwing out these quality companies, these excellent franchises without really doing the homework," she told CNBC's "Halftime Report" on Tuesday. She views the slump in Schwab shares, up 7% Tuesday but still trading at 14 times earnings, as an opportunity to add to her list of quality financial stocks. That includes Bank of America , a position she added to, calling it a rare opportunity to buy shares at one times book value and a 3% dividend yield. SCHW 1D mountain Schwab shares gain 7% on Tuesday Ritholtz Wealth Management's Josh Brown agreed with Link on Schwab, saying investors are failing to understand how its status as a brokerage firm sets it apart from Silicon Valley Bank, Signature Bank and Silvergate Capital, all of which failed this month. "If you're actually worried about your money, Schwab should not be the place you're running from," Brown said. "That should be the place you're running from somewhere else, toward." Traders like Cerity Partners' Jim Lebenthal recommend playing the banking sector through regionals, or the SPDR S & P Regional Banking ETF . Many of these names, barring any major deposit outflows, trade below book value and should find some relief as the interest rate fever breaks, he said on "Halftime Report." KRE 1M mountain Regional bank ETF slumps 25% in March After a short time in First Republic , Lebenthal said he sold the San Francisco-based regional bank given stepped-up bearish sentiment, taking a 10% loss. "I looked at the financial statements and I said, 'This is a good bank, and it is, it was a good bank,'" he said. "But what's happened in the interval is that sentiment has taken over ... in the form of deposit outflows that are tremendous." First Republic shares were up about 34% late afternoon Tuesday, but are still down about 86% year to date.