Before introducing the winner of the stock contest; Michael Price spoke a bit about the banking sector and other stocks he is bullish on.
We like some of the big banks like Goldman Sachs (GS), based on the sum of the parts valuation; it should be $100 more than it is currently trading at. Goldman has a tremendous business; they are not trying to rip people off. They make money by underwriting things and advising people. They have a great track record of doing that. There are bad apples in the industry, but most of the firms who were unethical are no longer in business.
We think the concerns regarding both Bank of America (BAC) and Citigroup (C) are both overdone. Even though they trade below TBV, they don’t even need more capital. This reminds me of Chase in 1994. The book value was $42. The stock was trading at $30 and it went up to $120. The scenario is very similar to Bank of America and Citigroup today.
Even though we had a big rally, there is still great risk-reward, especially in financials.
Banks are looking to buy consumer loan businesses. We like ITT Corporation (ITT) with the coming spinoff, JCP-RE play. The weak dollar is great for America.
The increasing amounts of mergers. Low interest rates are all a good sign, and I am overall bullish on market.
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