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Strategies & Market Trends : BAK - Investing
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To: batman10023 who wrote (359)3/1/2012 9:12:32 PM
From: Covenant  Read Replies (1) of 3249
 
b) who feel like they can't analyze the companies balance sheet and so stay away

I'm sort of in the b category also. These companies produce 10Ks which have a couple hundred pages of disclosures, and after reading them I feel they haven't disclosed very much at all. There can be enormous risks which cannot be detected in the financial statements.

Of course, all businesses have risks, many of which are undisclosed. It is the leverage which adds severity to the banks.

Why I generally avoid banks is I think the market ignores much of the risk when pricing the stocks. Nothing levered 10:1 should trade above a single digit PE.

There is another category:

e) do not want the regulatory and legal risks of businesses explicitly being targeted by the government.

YPF in Argentina is analogous to US TBTF banks in this regard.
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