Wachovia Continues Slide
More bad news from the Financial stocks. It what can compared to catching a falling knife, shares of Wachovia (WB, $23.80, down $0.59) fell another 2.4% yesterday and hit a fresh 52-week low of $23.13 in the process. I’ve been beating the drum on how risky Financial stocks are right now and who knows when and where the next tidal wave is coming from?
You know it gets scary when Moody’s (MCO, $36.20, up $1.33) drops 20% in one day, falling from $44 to $37, after saying a “computer error” was the reason behind the company giving out improper credit ratings. I didn’t blog on the matter because I think I’m still in shock. Moody’s has always been well respected in what it does but this was a shocker to say the least.
Wachovia is a mess and even at 52-week lows, the stock doesn’t appear to be headed for a recovery anytime soon. The company has taken massive write-downs to the tune of $4 billion, slashed its dividend, and is diluting the value of its stock. The dividend was cut from 64 to 37.5 cents a share and Wachovia raised $8 billion in new common and preferred stock. A billion here, a billion there in losses…just what the heck is going on here Wachovia?
I still don’t trust Financial sector and there will be a time when these stocks will appear to be dirt cheap. Maybe they are right now but I would wait for two consecutive quarters of good earnings before even thinking about buying a bank stock right now. I will be keeping an eye on the Financial Select Sector (XLF, $24.64, down $0.14) for any signs of a turnaround. This exchange traded fund is a safer way to play the Financial’s instead of finding a true bottom for a particular stock.
Rick Rouse
Rick@OptionsMentoring.com