A good time to buy banks stocks?

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Old Mar 17, 2008, 8:23pm   #1
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A good time to buy banks stocks?

Would now be a good time to buy big bank stocks? in terms of long term buy an hold strategy, they seem to be trading at pretty low prices at the moment and a lot of it seems down to all the negativity surrounding banking

Are big banks like RBS and barclays a good long term bet at todays prices?
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Old Mar 17, 2008, 8:46pm   #2
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Would now be a good time to buy big bank stocks?
No, how do you know they wont fall a lot more ?


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Old Mar 17, 2008, 9:17pm   #3
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No, how do you know they wont fall a lot more ?
Yeah, spot on Paul.
Tom Orton and I (regular contributor to Barjon's 'Swingin' the FTSE' thread) have a friend who's essentially a LTBH investor who was seriously considering buying Northern Rock last September '07 when it was around the £3.00 mark, on the grounds that it "couldn't fall any further". Said friend asked both Tom and myself for our take on the NRK chart and, independently of one another, Tom and I recommended that he leave well alone. He duly took our advice and, needless to say, he was very glad that he did. That's not to say that RBS and Barclays won't rise dramatically of course (forgive the double negative) - they probably will.

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Old Mar 17, 2008, 9:28pm   #4
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Addendum . . .
Having posted the above and re-read it - it sounds as if I'm recommending not buying the banking sector which is totally the wrong impression to give. Sorry! There may well be very good reasons to do just that and buy into this sector. However, my point (and Paul's point too, I think) is that to buy into it on the grounds that "it's cheap" or, in my friend's case "it can't fall any further" are very poor reasons indeed which are likely to result in loss and regret. (Paul - forgive me if I'm speaking out of turn and please correct me if I've misinterpreted your post.)
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Old Mar 17, 2008, 11:08pm   #5
 
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Agreed, buying even for long term buy and hold in a strong downtrend is probably not the smartest thing to do and represents too much risk in my view.

However, given that banking has historically been a good sector over the longer term, and present issues aside, many banks are still fundamentally good businesses and will continue to be so, the opportunity to buy at value levels will be worth looking at in the future. If we see substantial falls and a sustained period of the price having based out then I will look to buy, holding on a long term basis.

So if we see prices which represent excellent fundamental value in terms of earnings, with technical (chart) confirmation, I'll be a buyer.

Something to keep an eye on imho...
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Old Mar 17, 2008, 11:33pm   #6
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These are the types of situations which made Warren Buffet and other value investors legends. Amidst the panic stages of Bull/Bear moves, the market often forgets the underlying basic fundamentals. Banking would be a decent play for those who haven't been hurt by subprime, however you'd have to look around the market for strong companies who are tracking the ftse fall. As always in this game, don't put all your eggs in one basket though.
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Old Mar 18, 2008, 2:01pm   #7
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Originally Posted by peter450 View Post
Would now be a good time to buy big bank stocks? in terms of long term buy an hold strategy, they seem to be trading at pretty low prices at the moment and a lot of it seems down to all the negativity surrounding banking

Are big banks like RBS and barclays a good long term bet at todays prices?
For me, right now, banks are still offlimits. Most people have run away for the wrong reasons though. We all know of the Mortgage messes but no one has factored in the Recession, yet. Earning have yet to account for this contraction. Right now everyone is only worried about the writeoffs.

If you must own banks...
Leg-in (4-8 part buy in, DCAing every quarter) or MARRIED PUTS/w tight stops on the stock.
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Old Mar 18, 2008, 2:05pm   #8
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but no one has factored in the Recession, yet. Earning have yet to account for this contraction.
Watch for Revenue Lower/Profits Lower to come.
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Old Mar 18, 2008, 2:48pm   #9
 
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Agreed - I wouldn't touch them with a barge pole at present.

Something a TV pundit said rang true here. it went something like this,

"I'm staying out, I'd rather wait and pay for knowledge than wade in on guesswork now"
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Old Mar 18, 2008, 2:52pm   #10
 
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Don't buy shares in Banks, they're old economy. Buy Internet stocks, you can't lose. Soon, everyone will be using the Internet...everyone!
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