Bank of America (BAC - Get Report) and Citigroup (C - Get Report) are among the best picks in the banking sector while Goldman Sachs (GS - Get Report) and Wells Fargo (WFC - Get Report) are among the "worst investments," according to Vertical Research bank analyst Richard Bove.
Bloomberg first reported Bove's calls on the financials.
He contends that consensus within bank stock analysis "is no longer valid" as investors zero in on changing interest rates and the banks hike their payouts to levels exceeding net income. Bove emphasizes the "important" aspects of the sector, arguing its similar to the manufacturing industry.
In manufacturing they acquire raw materials, build goods and sell the products, he noted. While the banking sector follows a similar model, it is being hindered.
Its ability capture money (raw materials) is constrained by the Federal Reserve's tightening budget sheet. The introduction of financial technology is distributing its "manufacturing and distribution process." And its products, loans, are weakening as losses mount, Bove explained.
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