Am I a sucker like Buffet and Lampert in going long the banks/financials?

Discussion in 'Stocks' started by Port1385, Jun 19, 2008.

  1. I will admit it. I have small long term positions in BAC/FNM/FMD and keep averaging down. Am I a sucker like Buffet and Lampert in owning these names?
  2. You're more of a sucker for asking that question on elitetrader. Who knows where the Financials are going. Do your own analysis and trust no one else. I'm sure you have done some research so trust you're own judgement. You sure as hell can't trust Wall Street analysts so there is no reason to believe other ET members' opinions. It will just cloud your own observation.

    If someone knew the exact answer of the timing and direction of the Financials they can become millionaires if they put their money on the line. Don't take advice from anyone though. You have a contrarian approach which is good. Go with your gut.

    In regards to averaging down, that is a horrible method. Review any book written by a successful trader. Take Livermore for example, he argues against averaging down and it is one of the worst thing a trader can do. Your adding to a losing position. It's too difficult to call exact support levels.

    I would close your position. When you think they are going in your direction, put some money on the line.

    Cut your losses!!! Have you ever heard of this. Failing to do so is one of the worst things a trader can make. Stop averaging down...You should be averaging up.
  3. No one knows, how low they will go. For BAC and FNM I think a better strategy is to wait and buy after they have rebounded 15% off their lows and average UP. If the stocks keep making new lows, keep waiting with you money safe in the money market fund. I'd stay away from FMD, the chart seems to indicate that it's going to zero.

  4. mangudai


    Forget US banks and look at AIB instead.
  5. A lot of the financials appear to be cheap. The prices of some of these stocks have been cut in half or more. Even with the steep drop in prices on many of these stocks I don't think they are undervalued when you consider the amount of new capital these guys have had to raise and and the amount it will dilute their earnings by. There is also the question of more writedowns in the future and many structural problems in the industry as a whole. maybe if you're investment time horizon is several years they may be a decent investment but I expect there to be more short term pain for investors in these stocks.
  6. why are you buying FMD? buyout arb?
  7. Nah. Im just one of the suckers who started buying in in the 3s like Blue Ridge Capital. They upped their position 500%

    Its more of a gamble then a trade. Will large companies like BAC or FMD simply close their doors? Who will give out loans to the populace? They all are trading at multiyear lows.

    By the end of the year, I think I will have doubled my position in all for a long term hold.

  8. Avoid financials
  9. Daal


    FNM is going to $0. government will bail them out but should screw shareholders
  10. mark2


    Nobody knows if this is the best timing for financial stocks and nobody knows how long it will take for them to come back. Even the P/Book ratio of the bankers show extraoridinary bargains, my appoarch is to avoid them until the dust settle more.
    #10     Jun 19, 2008