"Over the last couple of months it has seemed like the only investors willing to put money into U.S. and European financial companies were big Asian and Middle Eastern institutions, many of them government sponsored," observes George Putnam.
"Should you follow in their footsteps?" asks the editor of The Turnaround Letter. Here is his review.
"There may be good reason to do so. These foreign institutions are staffed by smart people who do their homework, have long time horizons and they like companies with strong brands or market positions." Here, he looks at fivefiancal frms that have received cash infusions from sovereign funds.
"Some of these investors have scored big wins in the past. For example, Prince Alaweed bin Talal of the Saudi royal family bailed out Citigroup once before. He injected new equity into the bank in late 1990 during the last real estate related financial crisis. He bought close to the absolute bottom, and even today his Citi stock is worth many times what he paid for it.
"Of course, smart foreign investors do not always get it right. In the 1980's a number of very sophisticated Japanese institutions bought up marquee properties across the U.S. – such as Rockefeller Center in New York City – for what turned out to be grossly overinflated prices.
"All in all, though, we think it makes sense to consider investing alongside these sophisticated foreign investors. Their recent actions look to us like timely investments in good business franchises.
"Bear Stearns (NYSE: BSC) was one of the first large financial institutions to evidence financial stress last summer when it announced that two of its mortgage-related hedge funds had collapsed. To date, the company has written off $1.9 billion in mortgage-related loans.
"However, Bear Stearns is still well positioned in a number of investment banking sectors. With its stock down more than 45% over the course of 2007, Bear attracted a $1 billion infusion from Chinese government controlled Citic Securities.
"Citigroup (NYSE: C) has grown aggressively in many different areas in recent years. However, huge write-offs over the last few months suggest that the growth has not been well managed. Nonetheless, the strength of the Citi franchise has attracted several savvy investment groups.
"The Abu Dhabi Investment Authority put in $7.5 billion in November, and that was followed by $12.5 billion from the governments of Singapore and Kuwait together with Prince Alwaleed bin Talal.
"Merrill Lynch (NYSE: MER) recently reported the largest loss in its 93-year history, which led to the ouster of top management. But the company still has an enviable franchise in the brokerage business.
"New CEO John Thain has moved quickly to shore up operations and bring in new management talent. As a result, he was able to attract $12.8 billion in new capital from Singapore, Kuwait, Korea and Japan.
"Morgan Stanley (NYSE: MS) is another famous Wall Street house that stumbled in a big way last year. It was forced to write down mortgage assets by $9.4 billion, resulting in the company's first ever loss.
"Notwithstanding the problems in the mortgage area, the new management team that came in a couple of years ago appears to be making progress in rebuilding the firm. China Investment Corp. recognized the rebound potential at Morgan Stanley, and it invested $5 billion in the company.
"UBS AG (NYSE: UBS) has demonstrated that the U.S. firms were not the only ones to misjudge the subprime mortgage market last year. The Swiss-based financial conglomerate reported a total of $14.2 billion in mortgage-related charges leading to the layoff of some 1,500 at its investment banking unit.
"Additional writedowns may be coming, but UBS's strong global presence has attracted a cash infusion of $11.8 billion, mostly funded by a Singapore investment group. There is a possibility that UBS will enhance shareholder value by spinning off some of its far-flung operations."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
Why is gold making a new high, trading at $1,118.00 per ounce?
Chasing Value: Ten stocks for 2010 -- Part 1 
Closing Bell: A six-day rally (AIG, REGN, M, MOT, PALM, RIMM)
