Lisa Welch, manager of the $1 billion John Hancock Regional Bank Fund, expects U.S. bank stocks to rebound earlier than other groups and...
Lisa Welch, manager of the $1 billion John Hancock Regional Bank Fund, expects U.S. bank stocks to rebound earlier than other groups and to get a boost from financier Wilbur Ross Jr.’s plans to buy up U.S. thrifts.
“This is good news for investors in our fund,” Welch said of Ross’s plan. “It shows there’s a lot of interest in the sector and demand money coming in.”
Ross, who made his fortune turning around distressed steel and textile companies, has said he will seek $4 billion from investors to buy regional U.S. banks after the surge in U.S. subprime-mortgage defaults left many trading at bargain prices.
The KBW Bank Index fell 25 percent last year, compared with the 4.2 percent increase by the Standard & Poor’s 500 index.
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Regional Bank Fund fell 19 percent in 2007, including reinvested dividends, and an additional 6.4 percent this year, through April 17, ranking six out of 35 funds with similar investment styles, according to data compiled by Bloomberg. The top fund in the group this year, through April 17, was the $35.3 million Burnham Financial Industries Fund, which has dropped 1.7 percent. Among peers with more than $1 billion in assets, Welch’s fund is No. 1 in 2008.
The fund focuses on institutions that collect consumer deposits and provide mortgage, consumer and business loans. Its biggest gainers this year, through April 17, include San Antonio-based Cullen/Frost Bankers, up 9.5 percent, and Minneapolis-based US Bancorp, up 6.5 percent.
Welch said Ross’s move confirmed her belief that bank stocks will come back sooner than the rest of the economy, just as they did in the real-estate-led recession of 1990-91.
Banks will continue to report bad news in the second quarter and then begin to stabilize as interest-rate cuts and other moves to stimulate the economy take effect, Welch said. Greg Carlson, an analyst for Chicago-based Morningstar, praised the fund while cautioning investors against trying to time a recovery.
“It’s important not to act based on short-term predictions,” he said. “But if you have the patience to ride out this downturn, then I think the fund is worth holding.”