Are banks the new tech? It sure seems that way.
After the internet bubble burst, quarter after quarter went by where tech companies would lower their revenue outlooks, the stocks would dive, and people would buy in. Now quarter after quarter goes by where banks announce that they have to raise capital, the stocks dive, and new investors dive in. The latest news about smaller regional banks fits this pattern
But if you averaged into Tech stocks throughout 2002 you would have received a 7% annual return through today—about 1% better than the market. And Tech stocks hardly pay any dividends. Today you’re getting paid over 4% just to own the banks. And if they recover, their total returns should be great.
The moral of the story is that it’s usually profitable to be buying an asset that nobody else wants. And the best time to buy is when the blood is running in the streets.
Douglas R. Tengdin, CFA
Chief Investment Officer
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