Well with the largest bank failure in history now in the books, as Wamu is seized and sold by the FDIC, we may now have a bottom in the financials. By all measures and calculations this is the largest financial meltdown in history and could only reach a bottom after having the largest bank failure in history. Another sign we may be at the bottom is the greatest investor in our lifetimes, Warren Buffett, investing $5 billion in Goldman Sachs. Also if they pass the 700 billion dollar bailout as currently proposed, it would ensure the rest of the big banks will be on the road to profitability once again.
So what does this bottom mean and how can this help us make some money? Let's take a cue from Buffett and begin investing in good dividend paying financial stocks. Be sure to look at preferred shares of the major banks to invest in such as Wells Fargo, Bank of America, JP Morgan, US Bank, and Goldman Sachs. Sticking to preferred shares will decrease the chance your dividend will be cut and should be a lot less volatile than the regular shares. Staying with the big boys should ensure that your shares will benefit most if the bailout goes through.
Do you think this is a bottom in the financials?
Do you know how to find preferred share information?
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Here's some of my recent buys:
Chevron (owns leases on drillable oil fields around the world)
Baker Hughes (provides energy related services, like preparing oil fields for drilling)
The Shaw Group (small cap stock, builds power plants and other infrustructure)
Bristol Myers Squibb (medical products)
These companies provide services that will be high in demand even during a recession, and are a bargain right now thanks to the crisis. Most of them (except The Shaw Group) have very low PE ratios, often a sign that they have bottomed out.
My stock broker is very high on GE. It has a very strong position globally, and now has Buffet's financing to be aggressive in any marketplace.
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