Over the week, shares of Citigroup and AIG stocks rose over 15 and 25 percent, respectively. Are there more gains to come in these names? John Brady, senior vice president at MF Global and Jamie Cox, managing partner at Harris Financial shared their insights.
“I really like the large cap banks better—Citi and AIG are interesting this week, but the real story is in JPMorgan and Bank of America,” Cox told CNBC.
“We see retail sales continue to move up and markets start to improve. We’re going to see a turn in the consumer and these banks are going to do better.”
Additionally, Cox said he also sees some interesting opportunities in the regional banks.
“As dividends come back with these particular stocks, I think they will be the winners in the future,” he said. “The financials present a lot of opportunities for us.”
Cox also told investors that the best opportunity in fixed income remain in high-yield bonds.
“As default risk is getting lower, high-yield bonds represents an absolutely great opportunity for the foreseeable future,” he explained. “You don’t need the equity markets to move for you for high-yield bonds to do really well.”
The Shorts Did it. But...
In the meantime, Brady said the run-up in Citigroup and AIG stocks is due to short-covering trades.
“But it’s clear that the worst is behind for those companies,” he said. “So on any sort of pullback, investors may want to take a look for portfolio diversification purposes.”
Stocks in the financial sector may have gotten ahead of where the economy is, added Brady.
“With an unemployment rate close to 9.7 percent, the rest of the economy has to catch up with valuations in the short-term,” he said. “The credit markets are being supported by some extent by government intervention.”
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No immediate information was available for Brady or Cox.