Scott Rubin provides as succinct a high-level bull case for the financials as I’ve seen:
Despite the profit rebound, investors continue to shun [the financials] because of uncertainty surrounding the Dodd-Frank Act, which was passed last July. Banks and brokers are also being hurt by the opacity of their balance sheets and investor concern about asset quality.
This concern is so deep that banks and brokers are currently trading at 1.2 times book value compared with an 18-year average multiple of 2. This implies that the market believes that these stocks pose an inordinate amount of risk, which also suggests that they could richly reward investors at these levels.
Over the course of the last several months, it has become apparent that a fairly vibrant economic recovery is underway. In fact, 67 economists surveyed by Bloomberg have consensus GDP estimates for the fourth quarter of 3.5%. . . .
[I]nvestors who are looking to allocate capital to stocks at these levels should be, at the very least, intrigued by the financial sector. If the economic recovery continues to accelerate at the current pace, banks and brokers should do very well in the next several years. [Emph. added]
Well said! But then in the disclosure section, Rubin says he doesn’t own any financials and has no plans to buy any. Never mind. . . . For the record, we do have exposure to the group. Plenty of it. . . .