Why Warren Buffett is big on big Banks..?
- Trading Tips
- 6 months ago
Warren Buffett has made his name for having a good eye for value and as of recently he has his attention drawn to the big U.S. lenders.
The first major open-market purchase from Berkshire Hathaway was a $13 billion of bank stocks in the third quarter, highlighted by a new, $4 billion holding inJPMorgan Chase and a furhter $6 billion purchase of Bank of America.
“Buffett’s investments offer validation for what we see as the value in the group,” says Wells Fargo banking analyst.
“Banks are less cyclical than they have been in decades and have more resilient earnings streams because of improved financial discipline and risk control.” Mayo sees earnings growth of 50% or more for JPMorgan, Citigroup, and Bank of America over the next four years.
However investors do not share the same optimism, as bank stocks have been weak on concerns about the global economy and slowing loan growth.
The KBW index of 24 bank stocks is down 8% this year, Wells Fargo and Citigroup are off about 15%, while Goldman Sachs, is down 25%.