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Do you see any sub-sectors within your coverage trading at attractive valuations these days?
We suspect that the credit costs will remain elevated during the second half of 2008 and at least a part of 2009 and will continue to impact the earnings. Among the banks, we favor those which have low exposure to housing and residential construction loans and/or derive a significant portion of their earnings from fee based sources. Among the insurers also, we continue to prefer those which have superior capital levels and lower exposure to mortgage related securities in their portfolio, compared with their peers.
Are there Sells you would care to point out for investors to stay away from?
We would advise the investors to stay away from banks like National City (NYSE: NCC), Wilmington Trust (NYSE: WL), Zions Bancorp (Nasdaq: ZION), Keycorp (NYSE: KEY | Quote | Chart | News | PowerRating) and Comerica (NYSE: CMA).
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