Bove Says Sell Bank Stocks – US-FOREX.US
Dick Bove, vice president of equity research at Rochdale Research, thinks the banking industry is an attractive long-term investment, but for now he believes bank stocks are running on fumes and recommends investors take short-term profits.”The issue as I see it is that bank earnings will not improve in the third or even fourth quarter this year,” Bove said. “Many of these companies will show losses. The rational investor would step away from psychology at this point and take some profits. I suggest this even though I am not changing the long-term buy ratings on my favorite stocks.” In May, Bove said that the combination of more traditional banking operations with the economic recovery will lead to explosive earnings growth and unusually strong stock price performance. The banking industry, as measured by the SPDR KBW Bank
exchange-traded fund, fell 3.8%, in afternoon trading on Tuesday, while the broader-based Financial Select Sector SPDR
ETF slid 3.0%. Regional banks were especially hurt Tuesday, as the SPDR KBW Regional Banking
ETF fell 5.0%. Individual companies like Citigroup
fell 5.8%, while Bank of America
dropped 3.9%”Psychology toward the banking group had moved dramatically along with earnings,” Bove said. “Each shift in psychology carried with it change in how investors believed they should value banks.” Currently, the recent rise in the stocks does not appear to be driven by a change in the near-term earnings outlook, Bove asserted, but instead has been driven by a change in expectations: “Thus, it is our belief that these stocks are trading on fumes and not reality,” Bove said.
Though financials still make a good long-term investment, they’re probably not, if Roche is right, the place to keep money that will be needed soon. Now’s a good time for investors who don’t have three to five years to wait to take profits off the table.