Hoping for a rally
All of which served to underline comments made from a number of asset managers speaking at a Q&A session hosted by Jupiter Merlin’s John Chatfeild Roberts.
Asked to defend his banks position, James Findley, manager of the Findley Park American fund, was clear to point out his holdings in Wells Fargo and US Bank Corp (which he consider the two highest quality names) currently only account for 1.4% of the fund.
“We had 7% about a year ago. Coming out of the downturn banks just got cheap you saw credit was getting better and there were some very good investment opportunities because people hated them… but we have now been trying to think about, if interest rates rise, what are the counter-cyclicals and every year the number of companies that are in there that are counter cyclical shrinks.
“We have been asking ourselves, in a downturn could we own any of these banks? And if interest rates are sinking in a demand-vacuum world, most of these banks are a way under-earning on their net interest margin and over earning on credit; most American banks have hardly written a bad loan in the last seven years, there is no negative in the profit and loss book for credit at the moment and that is getting alarming.”
As a final point, Findley added, “We have cut them right down to the best ones and, if we had a nice rally we might sell them.”
