ASK THE EXPERTS
Bernard F. McGinn
President and chief investment officer of McGinn Investment Management in Alexandria
Bernard F. McGinn is president and chief investment officer of McGinn Investment Management in Alexandria.
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When will financial stocks be a good investment again?
For long-term investors, now is a good time to buy, but invest only in quality financial companies. Some of the strongest ones, such as Bank of America, AIG and J.P. Morgan Chase, are trading 40 to 60 percent below their market values of eight months ago. Why buy now?
The subprime story has been in the headlines for almost a year, so financial institutions have had time to determine their exposure and suffer the hit to their stock prices. Companies are starting to overcompensate by writing down assets to cover any eventuality. When the crisis fades, they will write these assets back up, adding to earnings.
There is a sense that the crisis is morphing from an end-of-the-financial-system type to something more run of the mill.
The Federal Reserve's recent actions to spur lending and make banks more profitable will kick in soon.
