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Is it time to jump back into beaten-down financial stocks--or is it still too early?
Even the financial giants themselves can't agree.
Goldman Sachs said Tuesday that it has selectively upgraded shares of financial services companies as well as the brokerage and asset manager sectors.
But the firm remains cautious on stocks of regional banks, mortgage and specialty finance companies and real estate investment trusts.
Meanwhile, Merrill Lynch chief investment strategist Richard Bernstein warns against the dangers of "bottom-finishing" in financial stocks.
"We continue to suggest underweighting financial stocks because of the myriad of risks facing the sector. This applies to financials in a global context, not simply to U.S. financials," Bernstein wrote in "The RIC Report."
In upgrading the brokerage and asset manager sectors, Goldman said the recent fears have been exaggerated and are mostly reflected in the prices of the stocks. Both sectors were upgraded to attractive from neutral.
"We have reached an inflection point for stocks with little credit exposure, or where exposure is marked to market," Goldman said in a research note. The firm expects a recovery in equity flow trends in the second half of 2008, but said this anticipated rebound is not yet priced into the stocks.
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