Meredith Whitney, Michael Price Team Up To Snuff Out Rally in Financials
Financial stocks clearly cannot catch a break. Meredith Whitney will not let Dick Bove's negative call on Goldman yesterday go unanswered, and is slashing her earnings estimates on Goldman well below the Street's consensus numbers:
The firm lowered their 3Q08 EPS estimate to $2.15 from $3.54 (consensus $3.64), their FY2008 est to $14.32 from $15.75 (consensus $16.77), and FY2009 est to $14.90 from $16.30 (consensus $19.75). Firm says the primary drivers for these revisions are customer volumes, overall weak global equity markets, and weak advisory and underwriting revenues. They say that as GS revenues are relatively the most equity-linked of its broker peers, the fact that broad global equity market indices are all down double-digits will have a meaningful effect on the co's earnings. Briefing
Dick Bove beat Meredith to the punch yesterday in throwing cold water on Goldman's near-term prospects, and even legendary value investor Michael Price is getting into the act.
Billionaire investor Michael Price is betting that Citigroup Inc. and Wachovia Corp. will keep tumbling and says he found few banks to invest in after total losses from subprime mortgages increased to almost half a trillion dollars.
``Citigroup’s got more pain coming,’’ said Price, who runs New York-based MFP Investors LLC and was chairman and chief executive officer of Franklin Mutual Advisers LLC in Short Hills, New Jersey.
Price, 57, is selling short both stocks even after Citigroup, the biggest U.S. bank by assets, tumbled 33 percent this year and Wachovia, the fourth-largest, lost 52 percent. Bloomberg
Price is dubious the banks and brokers will be able to maintain their dividend payouts, and thinks the recent lift is premature:
``This rally we’ve had, this huge rally, seems to me pretty premature,’’ he said. ``Dividend cuts are inevitable. You’re going to have to see them. How can they pay out dividends if they have to raise capital?’’
Price said he plans to buy stakes in smaller banks that are replenishing their capital. He can’t find many worth investing in, he said.
``In the next six months lots of banks are going to raise capital and we’re going to probably put money into 5 or 10 of probably 50 or 100 we’ll look at,’’ Price said. ``We’re going to be very selective.’’
Price recently bought Sovereign Bancorp (SOV-NYSE) however, and is willing to recapitalize smaller institutions that need money.
It is all making for a messy opening, but the reaction to the negativity might be a tell. The BuySide has had enough time to adjust their sheets, and many managers who have been underweight the sector will eventually lift their weightings in the group to a more neutral posture.
But maybe not today. What’s the rush?
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Price is long Sovereign Bancorp
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Michael Price Shorts Citigroup, Sees Few Banks to Buy
Bloomberg
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