Tuesday, March 13, 2007

How to Navigate the Subprime Crisis

Subprime lenders and anything associated with lenders is getting beat up. I see this as an opening to pick up shares in some great quality banks for a good price. Because remember, the market isn't perfect. The market swings like a pendulum between irrational pessimism and irrational exuberance. Right now, no one wants anything to do with financials. Bank of America (BAC) , a great company with industry leading profit margins and growth rate, the best dividend, is getting hit with a 2 percent decline, and is trading below its 200 day moving average. I would start picking away at a position. Don't buy in full in case we drop a couple more percentage points, but at current prices, there isn't much risk here, and you can collect the $2.24 dividend while you wait for the recovery, which should be sooner rather than later.

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