Buffett, Bank of America, and Five Financials

Warren Buffett’s decision to exercise Berkshire Hathaway’s warrants to purchase 700 million shares of Bank of America common stock will make it the bank’s biggest shareholder, writes Validea CEO John Reese in a recent Forbes article. Reese provides an overview of Berkshire’s history with Bank of America, explaining that this transaction will be the company’s most profitable in the financial sector. He also underscores the fact that financials have become a “cornerstone of Berkshire Hathaway’s holdings.” Using the stock screening models he created based on the investment philosophy of Warren Buffett and other market gurus, Reese identified the following five […]

Four Small-Cap Financial Stocks to Consider

Warren Buffett knows the insurance business like the back of his hand, and openly raves about how it allows companies to “invest in other people’s money and keep all the earnings on those investments,” writes Validea CEO John Reese in this week’s TheStreet. In his 2015 letter to Berkshire Hathaway shareholders, however, Buffett says that underwriting profits generated from this “float” have been increasingly threatened due to low interest rates and keen competition in the industry. He identifies the following four small-cap stocks that earn solid scores from his guru-based screening models: INTL FCStone (INTL), a financial services company, scores […]

Long-time Financial Sector Investor Chris Davis on Identifying the Best Opportunities

Chris Davis of The Davis Advisors, who currently manages the $14.3 billion Davis New York Venture founded by his father, thinks opportunities to invest in the financial sector are as good today as they were when he launched the Davis Financial Fund in 1991. That fund ended 2014 up 13% and is currently beating 64% of its peers. “We’re in a very similar environment” regarding financial companies as in the early 1990s, he said in a recent Barron’s interview, noting “they’re trading at as wide a discount to the S&P as they’ve traded in the past 20 or 30 years.” […]

Focus on Facts, Not Fear, Says Rogers

In his latest Forbes column, John W. Rogers Jr. stresses the importance of staying rational amid market turbulence, and says he’s bullish on the financial sector because investors have been treating it with an irrational amount of fear. “An unemotional response is the right one in many critical moments — be it the game-winning shot or a life-saving procedure,” Rogers writes. “But it’s hard to hold it together in a crisis. If you keep your wits and buy during panics, the rewards can be outsized.” One example of rational thinking leading to investing profits, he says, involves oil giant BP. […]

Berkowitz Still Thinks Big Financials Will Get Their Due

Bruce Berkowitz, one of Morningstar’s Fund Managers of the Decade for the 2000s, is sticking by his conviction that AIG and other financial stocks are undervalued and will make big gains. “Our inclination remains to run from the popular and embrace the hated where prices tend to reflect such mistrust,” Berkowitz wrote in a report to investors, according to Bloomberg. “Often, we are ahead of the crowd, too early, and appear wrong for a time.” In addition to AIG, Berkowitz says he still thinks banks like Bank of America and Citigroup will prove wary investors wrong. “Financials with enormous cash […]

Berkowitz Still Confident in Financials

Bruce Berkowitz remains high on financial stocks, and says his conviction about his financial holdings has only grown stronger. “I’ve been able to see their earnings for the past few quarters, the trends are getting better, the balance sheets are building, tangible book value is growing,” Berkowitz tells Bloomberg from the Morningstar Investment Conference. “The problems from 2007, 2008, still have a ways to burn through, but we’re more than, I would say more than halfway through the problem now.”  

Tilson Turns Bearish on Banks

About two months after turning bullish on some financials, Whitney Tilson — who predicted the housing bust and financial crisis — is now taking profits on some of his bank bets and predicting that more financial troubles are on the way. “There will be a headwind of continued losses for the better part of five years” with banks facing more losses on residential and commercial real estate, Tilson told Reuters, estimating additional losses of more than $1 trillion. Reuters adds that Tilson and Glenn Tongue, his partner at T2 Partners, have stopped their move into the U.S. mortgage bond market. […]

Lynch Pupil Makes Major Bank Move

FBR Funds Chief Investment Officer David Ellison, who avoided much of the financial sector meltdown, has been buying up bank shares lately — and a big reason, he says, involves the lessons he learned while working under the great Peter Lynch earlier in his career. According to Reuters, Ellison had just 10% of the FBR Large-Cap Financial fund’s assets in cash in early 2007, but raised that to 30% by the fall of ’07 and 50% by Jan. 31 of this year. Then, with the fund 60% in cash this February, Ellison started buying up bank stocks. “I bought them […]