Wachovia (WB) CEO Ken Thompson said last week the bank currently only has about $700 million in exposure to the dreaded collateralized debt obligations, or CDOs.
We bought Wachovia a while back in October because of a business model at Wachovia that Thompson has called “low-risk.” Almost 60% of Wachovia’s earnings come from general banking or simply put, checking and savings accounts, retirement services, auto financing and other retail and small business products. That area of the banking business remains healthy.
For 2008 Thomnpson said “We believe that 2008 will be a much better year for us than 2007, and we think the market will recognize that as we go more and more through the year,” he said. When you consider the stocks yields 6.7% and trades at 8 times earnings, once people realize the world is not ending, there is substantial upside.
We have been saying essentially the same thing for months now and Thompson’s comments should give those looking at financials some confidence.
I am confident that when we all do those “Best of” lists for 2008, those who are buying financial currently will be at the top…
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