FPA Changes Tune on Banks

Kenster1_GlobalValue

http://news.morningstar.com/articlenet/article.aspx?id=392637

After years of avoiding large financials and banks, FPA manager Steven Romick recently changed his tune. Romick noted in a July letter to shareholders that his FPA Crescent (FPACX) fund established a small position in three large banks. Based strictly on fundamental, bottom-up analysis, Romick found the valuations of these banks too compelling to pass up. Still, macroeconomic and regulatory concerns limited FPA Crescent's position to just 1.3% in the three banks.

{...}

However, at today's prices, Romick finally sees value in large, domestic banks. He estimates that Crescent's basket of financials trades at 85% of tangible book value and roughly 7 times normalized earnings. From a strictly bottom-up perspective, these stocks deserve a much heavier weighting in the portfolio, Romick said.

scott

He patiently waited until he believed valuations were reasonable and started a position that didn't involve massive risk to the fund. I didn't think the financials were a value for the last couple of years and still think they aren't (and beyond that, even if things stabilize I think there are better places to be than banks) but can respect the reasonable, fairly conservative and patient way that Romick approached this investment.

Kenster1_GlobalValue

http://finance.yahoo.com/video/marketnews-19148628/kotok-adding-to-bank-holdings-for-first-time-since-2007-26420736

Kotok Adding to Bank Holdings for First Time Since 2007
6 hours ago - Bloomberg

Aug. 25 (Bloomberg) -- David Kotok, chairman and chief investment officer of Cumberland Advisors, talks about his investment strategy for financial shares. Kotok also discusses Warren Buffett's $5 billion investment in Bank of America Corp. and the outlook for Apple Inc. shares.