Turn The Banking Crisis Into an Advantage

Most of us are familiar with Warren Buffett's famous quote, "Be fearful when others are greedy, and greedy when others are fearful." But many investors still struggle to purchase good companies when they're trading for less than they were just a few weeks ago.

I'll admit, it's not an easy thing to do when you are surrounded by fear mongering headlines.

The equity markets have been uneventful for the last ten months with choppy, sideways price action and very few quality opportunities. 

But that all changed last week, and now we have a "banking crisis" that is bringing down many good stocks and sectors with it.

Here is a recent headline that's contributing to the selling of good stocks, even though they'll likely recover once the dust settles.

What Would Happen if a Canadian Bank Failed?BNN/Bloomberg

As far as I know, there aren't any bank runs happening in Canada. During the Great Financial Crisis of 2008, Canadian banks weathered the storm better than most. And even though the current situation is not the same as the GFC, it's worth noting that the balance sheets of most banks are in much better shape than they were back then. 

Remember, it's the media's job to get your attention. This is how they make money.  

Canadian Banks are Not US Regional Banks

Late last week anything banking and financial related was sold because of the fear surrounding the collapse of Silicon Valley Bank. However, not all banks are created equal, especially when comparing a highly regulated and capitalized Canadian bank, to a California bank that dealt almost exclusively with the technology industry and startups.

The collapse of SVB created a ton of fear across the US Regional banking sector. As an example, the Regional Banking ETF KRE crashed 30%.

When a sector gets sold this fast and this extreme, it takes a lot of stocks down with it, even if they don't deserve to be sold. This creates an opportunity. 

We've seen over the years that 20% corrections/sell-offs in Canadian banks have provided good opportunities to accumulate more shares.

With all the uncertainty in the US banking system, could Canadian bank stocks continue to trade lower in the near term? Of course they could, but now is not the time to be fearful. It's time to pay attention. 

Remember, crisis equals opportunity.

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.