Meredith Whitney Warns: 'Stay Away from Financials'
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Rating Summary:
23 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 4 | Down: 8 | New: 54
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Meredith Whitney, principal of Meredith Whitney Advisory Group LLC, warned investors to stay away from banks. Her comments came during an interview on Bloomberg Surveillance.
Regarding financial stocks she said “it is a relative investment and it's a momentum investment. And the momentum is going against the fundamentals of these names. I would stay away.”
Having said that, Whitney admitted that there were still some great names, including PNC (NYSE: PNC), USB (NYSE: USB), and Wells Fargo (NYSE: WFC). And while these banks may look expensive compared to big banks, investors are willing to pay a premium for safety.
During the interview she said the financial industry could shed another 50,000 jobs on top of the 200,000 it has already cut.
"I would argue the banks have not over fired and are really middle of the way through firing,” she said, “shareholders are demanding increased profitability. These banks are not earning their cost of capital and it's being reflected in their stock prices."
Whitney thinks deleveraging has damaged the old “revenue machine” at large banks in Europe and America, and banks have to adjust to the new way of doing business.
Regarding financial stocks she said “it is a relative investment and it's a momentum investment. And the momentum is going against the fundamentals of these names. I would stay away.”
Having said that, Whitney admitted that there were still some great names, including PNC (NYSE: PNC), USB (NYSE: USB), and Wells Fargo (NYSE: WFC). And while these banks may look expensive compared to big banks, investors are willing to pay a premium for safety.
During the interview she said the financial industry could shed another 50,000 jobs on top of the 200,000 it has already cut.
"I would argue the banks have not over fired and are really middle of the way through firing,” she said, “shareholders are demanding increased profitability. These banks are not earning their cost of capital and it's being reflected in their stock prices."
Whitney thinks deleveraging has damaged the old “revenue machine” at large banks in Europe and America, and banks have to adjust to the new way of doing business.
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