Q: My portfolio is top heavy in Financials and lately two of the companies I have a good interest in have been punished by the market. Both after earnings that disappointed. Do you believe both have structural problems that will weigh on their stock price for a good time or is it only passing issues they will soon recuperate from? Thank you.
5i Research Answer:
Such an answer is always difficult, but based on commentary of both, it does seem that issues are more related to the sector and the economy rather than structural. EQB is a bit more vulnerable being much smaller, so economically its loans may be more risky, and this seems to be part of the problem. IFC does tend to have more earnings variability than big banks because of its casualty business. Much will depend on rates and the economy but we think at current levels both can still be held.