From time to time in my column I like to take a look at certain sectors of the market, in particular amongst big caps, to see if there’s any value lurking there. Whilst I’m normally a bottom up searcher, I find that this sort of top down approach is especially useful where a whole sector is out of fashion, demonstrated by the sector average presenting value level ratings relative to the market.
There will usually be some ostensible reason why a sector is considered relatively undesirable by the market. The value investor needs to decide whether those reasons are valid or just the normal drift of noise or sentiment having little basis in reality. Banks as a sector have been viewed unfavourably by the market for quite a while….