Irish stocks look cheap. Irish banks look very cheap.
The Irish banking industry is highly concentrated; a few players account for the majority of the industry. It's been an excellent business for a long-time; and in the long-term I expect it to continue to be an excellent business.
In the short-term, the Irish economy is going to slow-down, house prices are going to drop sharply (more sharply than in the U.S.), and construction activity is going to drop dramatically (much more dramatically than in the U.S. – where a lot of uneconomic building has continued despite the dire headlines).
Two banks (with ADRs) worthy of your consideration are Bank of Ireland (IRE) and Allied Irish Banks (AIB).
Your time will be much better spent studying these two companies than trying to sift through the rubble and find a gem among the major U.S. financial services firms who face:
1. A tougher short-term credit environment
2. A less promising long-term economic outlook
3. An inferior competitive position
Furthermore, these major U.S. financial services firms – diversified though they may be – have shown no evidence of possessing corporate cultures more inclined to conservativism than the Irish banks mentioned above. So, basically, these great big behemoths are set to sail stormier seas with inferior crews.
I know you think you know Citigroup (C), JP Morgan (JPM), Bank of America (BAC), and Washington Mutual (WM) – and maybe you do. But now's the time to get to know these two Irish banks, which I think you'll find are better buys than the domestic giants that constantly clog the financial media with headlines.
So that's today's pompous prognostication: Shares of Irish banks, Bank of Ireland and Allied Irish Banks, to outperform the biggest U.S. banks.
More importantly, shares of these two Irish banks look cheap for long-term investors, not just relative to the biggest U.S. banks, but relative to just about everything out there – in the U.S. and abroad.