Billionaire Michael Price: Goldman Is ‘Great’ Value Stock

Wednesday, 04 May 2011 12:07 AM

 

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Billionaire investor Michael Price said large banks such as Goldman Sachs Group Inc. whose shares have suffered this year are “great” value stocks.

“Some of the worst-performing things are big financials this year, which is kind of surprising,” Price said Tuesday in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “We own Goldman, we buy Goldman on dips. I think Goldman’s a great large-cap financial value guy’s stock.”

Goldman Sachs, the fifth-biggest U.S. bank by assets, has declined 9.7 percent this year after American lawmakers called for a probe into its dealings in mortgage securities and European antitrust regulators opened investigations into 16 banks, including Goldman Sachs, over credit derivatives. The New York-based company trades for 10.9 times reported earnings, compared with 15.4 for both the Standard & Poor’s 500 Index and the KBW Bank Index.

Goldman Sachs shares rose 0.4 percent to $151.87 at 4 p.m. Tuesday in New York, compared with a 0.3 percent retreat in the S&P 500, which has gained 7.9 percent this year.

Bank of America Corp.’s stock has declined too much, according to Price, president of MFP Investors LLC. He made his reputation as a value investor in the 1980s by buying shares of beaten-down lenders and running some of the best-performing mutual funds in the U.S.

Slump in 2011

Bank of America, based in Charlotte, North Carolina, trades at 11.5 times earnings after slumping 5.6 percent in 2011. It advanced 2.1 percent to $12.60 Tuesday.

The KBW Bank Index has lost 0.8 percent since Dec. 31.

Financial companies made up 38 percent of Price’s holdings in the fourth quarter, according to a filing with the Securities and Exchange Commission on Feb. 11. Price owned 40,000 shares of Goldman Sachs at the end of the 2010 and 720,000 shares of Bank of America, down 112,800 shares from the previous quarter.

The rate of mergers and acquisitions has been “tremendous,” Price said, citing Texas Instruments Inc.’s $6.4 billion deal last month to buy National Semiconductor Corp. Dallas-based Texas Instruments will pay $25 a share in cash for National Semiconductor, or 78 percent above the closing price before the deal was announced.

“This is sending me a big message about what businessmen think about where we’re going,” Price said. “It’s telling you how bullish people feel about the future.”

There have been 8,310 deals announced globally this year, totaling $824.1 billion, a 23 percent increase from the $669.3 billion in the same period in 2010, according to data compiled by Bloomberg.

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