XLF, Banking and Financial Sector Stocks

Top 76. Dec 20, 1999 1:14 PM

» MichaelC_AU - My bank is low.

The CNB, Colonial Bancgroup I own is down to $10 1/4. My basis is $6 1/2. I dislike being this heavy in one stock. I reinvested a years worth of divivends in it today.

I should have put it in vtsmx when I left their employment early 1998. At the time the stock hit $19, then not only would have sold at double today's price but I would have had a modest increase in vtsmx.

-- posted by MichaelC_AU

Top 77. Dec 20, 1999 4:31 PM

» Wendell - XLF and BTO

I am just wondering if XLF and BTO are funds or stocks. I guess everyone can tell how much investing savvy I have by asking a question like that. Anyway, any information would be much appreciated. Wendy

-- posted by Wendell

Top 78. Dec 20, 1999 7:13 PM

» MichaelC_AU - XLF and BTO

They are closed end mutual funds. Closed end mutual funds, unlike open end mutual funds, are traded on a stock exchange like an individual stock. Unlike open end funds, the closed end mutual fund company does not allow new purchases or distributions, but the shares are transferable on the exchange.

Because of this the market determines their valuation. Sometimes closed end funds can be bought for less than their actual net asset value, which is reported periodically, as required by regualtions. When this happens, the fund is said to sell at a discount to NAV. I think someone here mentioned that these funds are/were trading below NAV.

Is there a link to NAV information on the web? If not I think Barron's will have the information.

-- posted by MichaelC_AU

Top 79. Dec 20, 1999 7:49 PM

» Wendell - Michael C

Thanks Michael, I have never ventured into this uncharted venue of closed end funds so I guess I will just sit on the sidelines until I get a better understanding. So it seems to me that if you can buy it at a discount to NAV, then you must sell it also at a discount? Wendy

-- posted by Wendell

Top 80. Dec 20, 1999 9:45 PM

» JenL_2 - Wendell....

..It's all new to me also. If you read back a few posts on this thread, Kirk has a post on XLF - it's a financial sector spider. And Thruhiker posted some info on BTO - it's a closed end fund. There are posted links to tables of all the financial institutions in the portfolio of each fund. Both trade in real-time like a stock.

I bought some BTO today @ the closing price of 7 1/2 and some XLF on 12/15 @ 23 1/2. Not betting the farm on either of these, but wanted more exposure to the financial sector.....Jen

-- posted by JenL_2

Top 81. Dec 21, 1999 11:29 AM

» Kirk - XLF doing well on Fed News of no change in bias or rates

While some sites were discussing legal issues of reporting on recaps of Monday Night Football owned by ABC/Disney….

Some of us were buying financial stocks…
<img src=http://iccharts.quicken.com/bin/icenter.... width=470 height=180>

Yipee!

-- posted by Kirk

Top 82. Dec 23, 1999 3:34 PM

» MichaelC_AU - XLF & BTO

XLF sounds like a depository receipt. I did not catch that before, thanks Jen!

Depository receipts are not closed end. Therefore you don't have to worry about discounts. Nice words of wisdom Wendell about closed end funds also selling at a discount.

I guess the point here is that financials have been neglected lately and we are playing for a change next year. Hopefully another merger mania like 1996-1998 for financial with banks and this time, insurance companies buying banks.

-- posted by MichaelC_AU

Top 83. Dec 23, 1999 5:26 PM

» Rande - Michael,

Michael,

Yes. Add to that a belief (hope) for lower rates and "value" may turn out to be "growth" in this case.

-- posted by Rande

Bank stocks might be the place to invest for 2000?

Top 84. Dec 26, 1999 11:53 AM

» JenL_2 - Banks Stocks for 2000?

This article from the 12/24 SI Daily seems to agree with the favorable prospects for the financial sector in Y2K:

Market Analysis

As the century comes to a close, allow me to borrow some work from Steve Harmon. When historians review 1999, they will describe it as one of the most profitable in the history of the stock market, and IPO's were the primary reason for its success. More than 500 companies flooded the market with offerings worth more than $100 billion during the year.

Technology companies made up the lion's share of those names, with the Internet being the dominant industry. However, banks were not earning fat fees exclusively through initial public offerings, merger related activity was equally robust. Leading the list was the acquisition of Netscape by AOL. Isn't it funny how Netscape initially brought Microsoft to the Department of Justice saying they were using their monopoly power to distributing its browser, and now they have essentially disassociated itself from the whole proceeding?

Earlier this year Excite was purchased by @Home which was later swallowed by AT&T. Recall that AT&T bought TCI cable in 1998, so this unique and powerful combination brought high-speed access to the forefront of an emerging Internet experience; essentially paving the road for broadband. Despite rumors that Excite and @Home are potentially breaking up, broadband (a faster more personal and unique entertainment experience) is here to stay.

Speaking of the ultimate portal, Disney, the struggling multinational behemoth, decided to throw its hat in the ring and formed the GO network. Combining brand names like ABC and ESPN with the search capabilities of Infoseek, another portal was born. Then Vulcan Ventures acquired a piece of Go2Net, creating a formidable portal and CMGI announced plans to spin off AltaVista in an IPO.

A common theme in all of these blockbuster deals remains the their association with the bank sector. I mention it only because 1999 was not the best year for the financial stocks, but now might be a good time to re-visit them as an investment idea. Sure, many believe that we are in a period of rising interest rates, which is usually detrimental to the performance of bank stocks. I don't argue with this point.

However, there are reasons to believe that the financial stocks are poised to perform better in the year 2000. First, the banking industry was one of only three industries (utilities and transports being the other two) that absolutely couldn't afford to have anything go wrong with Y2K. Their spending might have been a little extreme, but never the less it was a chance they couldn't take. Those hundreds of millions of dollars were a one-time cost, which means better profitability next year.

More importantly, as long as the public's demand for IPO's remain strong, banks will continue to feed the investing communities appetite. Generating huge fee's for each new offering is only part of the benefit. As these companies grow and choose to do more financing or make acquisitions, these banks stand to do even more business.

Finally, the Glass-Steagle Act passed right after the depression, separating commercial and investment banks, is coming down. As we move forward down the road toward deregulation, a struggle for supremacy will ensue, and as companies position themselves in certain markets to compete with other banks, there will be a significant amount of consolidation. Takeover premiums will offer investors added incentive to allocate a portion of their portfolio to the financial sector. 1999 was a great year, but now it's history and the search begins for the best investments of 2000.

.....Jen

-- posted by JenL_2