Bank stocks should double in a year
He first told us on Wednesday that financials could climb 10-15% in two months or so, but now Doug Kass tells us banks look like they have even more upside - a lot more upside.
And Kass is putting his money where his mouth is.
Kass, who is the president of Seabreeze partners and tells us he bought the XLF at $13.
And after examining a slew of factors, he now he tells us "I'm also making a medium term call. I think banks stocks can almost double within the next 12 months."
Largely, Kass thinks most investors don鈥檛 understand that what鈥檚 behind the current weakness has a whole lot to do with forced liquidations from big money hedge funds and exaggerated moves due to high frequency trading. In other words, banks were oversold.
Also, he sees some tailwinds in the way of low interest rates which Kass calls, 鈥渁 silver lining for the banking industry.鈥� And he says franchise values are enormous relative to the current stock prices.
And despite all the headwinds such as the flat yield curve and weakness in real estate, he thinks there鈥檚 still plenty of money to be made in lending, plain and simple.
鈥滻f investors begin to focus on pre-tax income and recognize how strong and sustainable the numbers are they鈥檙e soon realize bank stocks are at absurd levels relative to their earnings power one to 3 years out.鈥�
And Kass鈥檚 enthusiasm for stocks isn鈥檛 limited to the banking sector. He says it extends to the entire stock market.
鈥淚 see no evidence of a double dip.鈥�
Kass explains that a lot his 鈥榯ells鈥� or gauges of real time activity are holding up just fine.
The Conference Board鈥檚 Leading Economic Indicator is up 6.2% year over year, and 鈥渦sually we don鈥檛 have a recession until it鈥檚 negative.鈥� Kass says the same holds true for retail sales. 鈥淭he Johnson Redbook Index was up 4.7% - and that鈥檚 through last Friday. And the 4-week moving average on initial jobless claims is now at its lowest levels since April.鈥�
All told, 鈥渢hings just aren鈥檛 as bad as the market suggests. I just don鈥檛 think we鈥檙e falling off a cliff.鈥�
