Promising Five-Year Outlook for the Banking Sector: Anything Linked to Mortgages is Positioned to Perform Better Going Forward, Says Portfolio Manager Francois Rochon

Wall Street Transcript

67 WALL STREET, New York - April 22, 2013 - The Wall Street Transcript has just published its Investing in Energy, MLPs and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Portfolio Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing, Long-Term Investing, High Quality Companies, Investment Strategies, Large Cap Investing, Investing in Energy, Oil and Gas

Companies include: Wells Fargo & Company (WFC), M&T Bank Corp. (MTB), Bank of the Ozarks, Inc. (OZRK), Fastenal Co. (FAST), CarMax Inc. (KMX), Walt Disney Co. (DIS), Union Pacific Corp. (UNP), Berkshire Hathaway Inc. (BRK-A), JPMorgan Chase & Co. (JPM) and many more.

In the following excerpt from the Investing in Energy, MLPs and Other Strategies Report, a portfolio manager discusses his investment philosophy and his portfolio-construction strategy:

TWST: You mentioned a banking theme. What led you there a few years ago and where does that stand now?

Mr. Rochon: For quite a while, bank stocks were very cheap. People were afraid of them, and to some extent, they still are. For example, Wells Fargo and JPMorgan (JPM) trade at about nine times forward earnings. We think that many banks are undervalued.

Our two regional banks, M&T Bank and Bank of the Ozarks, are still growing pretty fast by making good acquisitions. But I would add that it is not really the banking industry as such that we like; it's really that we think that we own the three best banks in the U.S., because to us, their CEOs are the best of the sector. We think these are top guys, and one of the reasons that we were able to purchase them at very attractive level is because investors in general were very pessimistic about this industry.

They are now a little less pessimistic than a few years ago, but the industry is doing much better. The real estate market is doing a little better. So anything linked to mortgages should do better going forward. We still think everything is in place for a good five years for the sector and particularly for our three banks.

TWST: What do you think investors are missing when they look at Wells Fargo these days?

Mr. Rochon: People always have this emotional relationship with stocks, and once they have been bitten by something, it takes a while to get back into it. I think investors were burned by the banking industry in 2008, and it's going to take many years of earnings growth to really get people more enthusiastic about this industry. But it will come back.

Wells Fargo has done pretty well lately, but we think the next five years looks even more promising. It's strange, you never...

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