Beware the financials

Two top stock-pickers spoke today in Chicago at the annual Morningstar Investment conference and said they are steering clear of purchasing any financial service company stocks right now.

Both Susan Byrne, founder and chairman of Dallas-based Westwood Holdings Group Inc. and Bruce R. Berkowitz, founder and managing member of Tampa-based Fairholme Capital Management, told advisers that they’re leery of stocks in the financial services sector right now.

“We’re not buying financials,” said Ms Byrne, whose firm is a publicly traded institutional asset firm with about $8 billion in assets under management. “We never buy more than 25% in any one sector.”

She said she wants to wait until banks become more transparent so that it is easier to understand outstanding debts.

She worries that the industry will take a long time to recover from the financial credit crisis. “It’s one thing to get out of the crisis and it is another thing to get out of the woods,” Ms Byrne said.

Mr. Berkowitz, whose firm is an open-end management investment company, said he’s also puzzled at the difficulty he has in trying to learn about financial firms’ outstanding debts. “Today, it’s almost impossible to know what they owe,” he said.