Avoid the Bank Dilution Sting: Strategist

Investors should look to buy into banks that don’t need to raise further capital, but avoid those that do, Clem Chambers, CEO of ADVFN, told CNBC Friday.

“The question is: are certain banks going to have to dilute their shareholders further? And from an investment point of view, if you believe that a bank isn’t going to have to dilute its shareholders, there’re very good long, even from a relatively elevated position,” Chambers said.

“If you think there is any prospect of a bank having to do an equity raise then they’re not a long, I would say a short,” he said.

Swiss wealth manager UBSissued a new share offer in a bid to raise $3.46 billion from the market Friday, sending its shares nearly 3 percent lower as investors bulked at the news.

“When banks do dilute, the shareholders really do get it in the neck,” Chambers said.

- Watch the full Clem Chambers interview above.


Disclosure information was not available for Clem Chambers.