Dear Reader,
Bank and oil stocks have staged a remarkable recovery in the last two months. Bank and oil production stocks are the companies which could be described as value stocks in the current environment. That is, stocks with low Price/Earnings, Price/Book, Price/Sales ratios. The Dow Jones Industrial Average Index which is heavy with bank, oil production companies and other value stocks has outperformed markedly the growth companies Nasdaq Composite in the last several weeks.
Are banks and oil production stocks still undervalued? No. I think they are in mostly for another large fall, especially bank stocks. Oil and natural gas production stocks could well keep most of their value since the demand for oil for the global economy is inescapable. What is more, people could start owning more cars and consume more petrol to avoid public transport commuting.
I expect two WWs shaped economic recovery or ultimately a kinked L-shaped recovery in terms of economic growth in the mid-term. A wave of defaults is unavoidable, which will put pressure on banks to provision, write off loans and ultimately record losses. This basically means that banks stocks could fall by 20-25% or from current levels.
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or sell any securities. The opinions expressed on the blog are Petar
Posledovich's. Petar Posledovich does not
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networks. The information presented is "as is".
Petar Vladimirov
Posledovich is not liable for any investment losses incurred by reading and
interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may
possess some of the securities, currencies or their derivatives mentioned in
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Respectfully yours,
Petar Posledovich
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