The Wall Street Journal reports (subscription required) that a number of prominent value investors have unloaded their stakes in beaten down financials, booking hefty losses in the process. The highly-respected Ariel Focus Fund has dumped its stake in Citigroup (NYSE: C), booking a 24% loss over three years. Weitz Partners Value Fund has dumped stakes in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Read the Journal piece for more examples.

It's impossible to look at these sales without wondering if it's a sign of a bottom. When the most patient investors have thrown in the towel, who is left to sell? Contrarians might look at this is a sign that it's time to dive into badly beaten financial stocks with subprime exposure, but I'm not so sure.

The reason that so many prominent value investors are bailing is that there is a complete lack of visibility and transparency at so many of these names -- the solvency of the company depends on the accuracy of the valuations listed on the balance sheet, and those valuations are in question.

It might well be that the brave few who buy these names will do quite well, but it wouldn't call it investing: buying something you don't really understand is speculating, and I don't think there are too many people who really understand the financial statements of companies like Fannie and Ambac (NYSE: ABK).