Is Washington Mutual stock at a good time to buy?

Question

Last time I checked WAMU was at $3.50/share. That's the lowest they've ever been and my guess is in the next couple of years they'll either go bankrupt or pick things back up again. I was thinking of buying $1000 worth of shares (Approx. 285 shares) and letting it sit long-term to see what happens. Is this a smart risk?

Answer 1

Since you are willing to take the long-term approach, then yes, I think it would be a interesting but potentially profitable risk to take (assuming this only represents a small part of your investment money).  I've been thinking about taking a position in a number of financial companies myself, with the same sort of reasoning, including WAMU, JPM, BAC and WFC.   (I've already taken a small position in ACAS and HTS which are not banks but tend to follow the financials.)

You may be interested in this Morningstar analysis:

http://news.morningstar.com/articlenet/a...

In any case, none of these would be recommended for those with a short-term attitude or who don't have an appetite for some risk.

Answer 2

I cringe everytime someone wants to buy something because its "the lowest its ever been".  Heck, GM is the lowest its ever been too, but it hasn't gone up in 40 years.  Anyhow, about WaMu, this is very risky.  These guys could go under, though honestly I think the gov't will bail them out - they really are to big to fail and their failure would cause so many other people and bank to have so many problems that I think the gov't will lend them whatever it takes to keep them going (but this is just a guess).  Still in the short run they are destined to have many billions in additional writeoffs from sub-prime and things look just terrible.  True that maybe its when things look their worst thats its time to buy, but this is still a very risky investment.