Here’s Oakmark Funds’ Bill Nygren via Fidelity Viewpoints:
At Oakmark, we start by indentifying companies that meet our investing criteria. Right now, one area we like is financials, particularly banks. Investors are still frightened about what happened five years ago, but lending standards have become tighter. I think almost any loan written after 2007 went to somebody with a very high probability of paying that money back. So I think the asset sides of bank balance sheets are stronger than most people give them credit for.
I find it ironic that bears on banks say increased regulation will make these stocks look like utilities. Bank stocks are trading at 70% to 80% of book value, and the average utility trades between one-and-a-half and two times book value. So if banks suddenly traded like utilities, it would be wonderful.
LOL, it would be wonderful and Monsieur Dimon’s worst nightmare realized.