Bank stocks have a bright future thanks to their improving fundamentals, says Anton Schutz, chief investment officer of Mendon Capital.
The KBW Bank Index rose 30 percent last year.
Schutz expects choppy trading in bank stocks for the near term, as Washington grapples with the debt ceiling and budget.
Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.
But, “these stocks are very cheap,” he tells Yahoo. As new regulations and the settlements for old transgressions get completed, banks will show strong earnings, Schutz says.
With bank stocks’ huge rise last year, their multiples are back where they were two years ago, he says. But, “their balance sheets are much stronger.”
This year may be a strong one for housing, which also would help bank stocks, Schutz says.
“If you’re a buy and hold investor you can put these away, and you’ll be happy in a couple years. … You’re going to make a lot of money.”
Schutz recommends Citigroup (C), Regions Financial (RF), Fifth Third Bancorp (FITB) and JPMorgan Chase (JPM).
Gerard Cassidy, bank analyst for RBC Capital Markets, joins Schutz in the bullish camp.
"We continue to be bullish [on bank stocks] this year due to the continuing improvement in earnings, coming from credit improvement and also loan growth," Cassidy tells CNBC.
He too thinks low valuations and the completion of the most damaging new bank regulations argue in bank stocks’ favor.
Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.
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