One of Warren Buffetts famous investing sayings is be fearful when others are greedy and greedy only when others are fearful. Or, in other words, sell when others are buying and buy when theyre selling.
But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with some ideas for investments that may be past their prime
So, in this series of articles, were going to look at what customers of The Motley Fool ShareDealing Service wereselling last week, and what might have made them decide to do so.
Standard Chartered (LSE: STAN) has had a pretty torrid time of late. After being a stock market success story for years, and emerging from the credit-crunch seemingly far less scathed than some otherbanks, the Asia-focused bankhas fallen from grace over the past year, with its share price tumbling 16% whilst the FTSE 100 has risen over 6%.
For one thing, it wasnt as unaffected by the credit-crunch as was thought. Loan impairments soared by a third last last, up to $1.61bn from 2012s 1.2bn. And, according to The Times, Standard Charteredhas been busy reclassifying loans to some Asian clients as high risk, raising the spectre of further provision for impairments to come.
Secondly, the bank has been hit by fines from regulators. In 2012 it was fined $667m by New York States Department of Financial Services (DFS), for breaching USmoney-laundering sanctions against Iran. And Standard Chartereds reputation wasnt enhanced when Chairman Sir John Peace had to make a very publicback-peddle from describing the offences as clerical errorsrather than wilful acts.
Unfortunately, that hasnt been the end of it last month the bank was fined a further $300m by the DFSfor failing to meet the requirements of the 2012 settlement, because it hasntproperly addressedproblems with its anti-money laundering procedures. And on top of the fine, Standard Chartered will nowhave its compliance operations monitored for a further two years and is barred from opening dollar-clearing accounts for new customers at its New York branch without the DFSs approval.
Lack of cheer
And last months half-year results didnt bring any cheer, either not that anyone following the bank had really expected them to. Profit dived 20%, falling to $3.3bn, with a 5% fall in operating income. Normalised earnings per share (EPS) were a hefty 21% lower, at 96.5 cents, and the dividend was left unchanged.
Of course, Standard Chartered could well turn things around. Hopefully it will deal with its complianceissues to the regulators satisfactionand avoid further sanctions. Maybe there arent too many more bad debts lurking in its loans book.
And many of its other problems are the usual cyclical market and economic ones that affect all banks. Despite the current slow-down in Chinas rate of growth, Standard Chartereds Asia-focus means that its well-placed to capitalise on Chinaslong-term transition to aconsumption-based economy.
So theres an argument that now when its share price is severely depressed might be just the right time tobuy Standard Chartered, treating it as long-term recovery play.
But enough people last week remained unconvinced by Standard Chartereds prospects, and they put the bank in the number 1 spot in our latest Top 10 Sells list* and they put it there by some margin over the number 2 position.
And, of course, no matter what anyone else was doing last week, only you can decide whetherStandard Chartered is currently a buy, sell or just a hold tight.
Working out whetherabank is worth investing in can be a tricky business, so, to help you conduct your own analysis, our expertshere at The Motley Fool have put together a specialreport entitled“The Motley Fool’s Guide To Banking”.
Thisexclusivewealth reportprovidessix key ‘City insider’ valuation metrics for each bank traded in London and gives a run-down of the whole industry.
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Jon Wallis has no position in any shares mentioned. The Motley Fool UK ownsshares of Standard Chartered. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
* based on aggregate data fromThe Motley Fool ShareDealing Service.