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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (57772)	8/14/2016 5:23:47 PM
From: MCsweet	of 78756

I remember Graham's distrust of banks as well. I think it is from Security Analysis. There is something to be said for it -- it is hard to have a high margin of safety in a highly leveraged company, as we saw in the 2008-2009 crisis. That being said, I nervously own financials here like ALLY and a little BAC because they are cheap, and the market is expensive. I have been slowly selling down ALLY at very nice gains as my thesis is playing out. I have been contemplating selling down faster, but ALLY instituted a dividend and in a few weeks will be buying back stock below book, which is accretive to earnings and book and helps support the stock. With that and their long experience in auto loans, I hopefully will be out (maybe by year end?) before any potential auto loan crisis hits them. Resale values on used cars are down, so credit losses will tick up, but they planned for that already. I am still open minded to selling more ALLY more aggressively. I don't have as much confidence now as I did a few months ago. If there is more of a spike into a rate increase than I probably would sell aggressively because I don't think rate increases will substantially help bank profits. MC

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