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Stock Strategist

Fire Sale on Financial Stocks

The market panics, but we see huge value in these names.

Mentioned: , , , , , , , ,

"A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain."

Robert Frost could well have been talking about the current state of the financial markets when he penned this quotation. Even with all the information--and disinformation--swirling around the current financial market panic, it is possible to boil the problems down to one essential element: credit. The vast majority of financial companies need it, and right now, it is hard to come by. No one wants to lend money to a borrower (be it a company or individual) that might not pay it back. So many lenders have cut off riskier borrowers or closed their doors altogether. This had been feeding on itself in a type of vicious cycle that has hurt financial companies very broadly.

Rachel Barnard has a position in the following securities mentioned above: BAC, BRK.B, CFC. Find out about Morningstar’s editorial policies.