Entered long during week of 7/28/08 at 16.76

REGIONAL BANKS: TFS Financial (TFSL), American Capital Agency (AGNC) Hudson City Bancorp (HCBK), People's United Financial (PBCT)

Mad About Options: Feeling Out Freeport-McMoRan:
The Mad About Options crew reviews Jim Cramer's recent bearish comments about Freeport McMoRan and offers options strategies for traders and investors. Also hear options ideas for General Motors and Hudson City Bancorp.

Click here to watch the video.

Our No. 5-ranked fund, BlackRock International Opportunities, is down 6% year-to-date and 4% for the past 12 months. Managers Thomas Callan and Michael Carey aren't used to that; since 2003, foreign-equity funds have beaten U.S.-focused portfolios. Despite its near-term setback, however, the fund, which reopened to new investors in March, has earned a place among our survey's top 10 for four consecutive years, posting a 26% return for the five-year period. Callan and Carey are taking profits in energy and materials and buying shares of New Jersey's Hudson City Bancorp (HCBK) and Sweden's Nordea Bank (NDA.Sweden).

Cramer: No Transparency, No Belief in Banks: Jim Cramer says the lack of bank transparency means he won't be buying any of the country's top banks.

Click here to watch the video

From a recent Mad Money show:

"The stock is at 17 and all I can tell you is I am not recommending a single financial."

A thrift that did not make the mistake of moving assets off its balance sheet. The bank serves high net worth customers with steady cash flows and rising growth

A thrift that did not make the mistake of moving assets off its balance sheet. The bank serves high net worth customers with steady cash flows and rising growth

Q: How about a different short holding?

A: Hudson City Bancorp [HCBK], which is based in New Jersey. The shares have gained about 60% from their July '07 lows and now trade at 21 times '08 estimates and two times tangible book. They have a wholesale funding and asset-generation strategy, which allows them to keep expenses low. Basically, they borrow funds from the Federal Home Loan Bank of New York and use repurchase agreements. So they, in effect, purchase money, more so than relying on deposits. In addition, they buy most of their assets, usually through brokers. A big chunk of their assets are first mortgages and mortgage-backed securities. So for the most part, they are not a retail originator of loans, and they are benefiting from the steepness of the yield curve. And, even with all that, they will earn less than a 10% return on equity this year, so I just don't get the valuation. Furthermore, when you have a wholesale business model, that means you don't really have a valuable franchise that another bank would pay much for. So a recent stock price represented approximately a 100% premium for their core deposits, which is how bank acquisitions typically get priced. And I don't think their deposits are worth nearly that much to a buyer. Everything looks great for them now, if you a call 10% ROE great. But they are not immune to credit risk in a recession and a weak housing market. I also think their loan-loss reserve at 0.15% is very low, relative to others'. When the Fed rate-cutting cycle is over, I don't want to own a spread play with credit risk that's trading at two times book.

Not exposed to Sub-Primes