Fund Managers Turn Bullish on Financial Stocks

Tuesday, 21 Feb 2012 07:48 AM

By Dan Weil

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Financial stocks are red hot this year following last year’s plunge. And investors can thank mutual fund managers for the rally, which many think will continue, The Wall Street Journal reports.

Fund managers purchased a net $3.2 billion worth of bank shares in the seven weeks through Feb. 15, EPFR Global reports. That compares to the $199 million they sold during the same period of last year and the $15.3 billion they unloaded in all of 2011.

Accelerating U.S. economic growth, a calming of Europe’s debt crisis, and U.S. banks’ progress in cleaning out their bad assets have turned money managers bullish.

Editor’s Note: URGENT: ‘Wealth Gap’ Widens to 1929 Crash Level. See the Shocking Footage. See the Evidence.

The KBW Bank index of large U.S. banks has surged 16 percent so far this year, nearly doubling the 8.2 percent gain for the Standard & Poor's 500 Index.

Mutual funds concentrated in financial stocks have benefited of course. Fairholme Fund, led by star manager Bruce Berkowitz, plummeted 32 percent last year, as he lifted its concentration in financial stocks to 76 percent in August. But so far this year, the fund has rebounded 20 percent.

One thing banks apparently don’t have to worry about is moves by ratings agencies to cut their credit ratings. Moody’s Investors Service announced last week that it may downgrade 17 firms, and the market shrugged.

“The downgrade is unlikely to shake the market a lot, as this has been expected for quite some time,” Lewis Wan of Pride Investments Group tells Bloomberg.

Editor’s Note: URGENT: ‘Wealth Gap’ Widens to 1929 Crash Level. See the Shocking Footage. See the Evidence.

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