Investors taking a defensive stance by abandoning tech and financial stocks may be making a mistake, according to a report in this week's Barron's.
While U.S. banks' balance sheets are in the best shape seen in decades, their stocks are trading at lows seen during the latest recession, Barron's columnist Andrew Bary's wrote, citing analysts.
Bank stocks began the year off 13%, he noted, with the largest banks notching the steepest losses. Analysts say the selloff makes them some of the best bargains in the market, he added.
The top banks are in the strongest positions, wrote Bary, noting that a number of them are trading below tangible book value. In the past, similar conditions have made for good buying opportunities, he noted.
Although bank loans to the distressed energy sector do concern analysts, some say exposure seems manageable based on fourth-quarter conference calls, Bary wrote. Banks either lent money to investment grade borrowers or have set aside reserves to cover potential losses on riskier bets.
Even presidential candidates' anti-bank rhetoric is unlikely to be as detrimental to investment banks as it might seem, he noted. CLSA banking analyst Mike Mayo sees breakups boosting shares, Bary wrote, since many of the banks trade below their sum of parts valuations.