Given the shellacking that banks have suffered over these past few years, many investors have begun to posit that the bad news is fully priced in, the difficulties are behind the industry, and bank stocks may once again be a good bet.
Not so fast, says Inside Value analyst Jason Moser. According to the FDIC, some 700 banks are still considered "problem institutions" today. That's 10% of the industry. Just since January, the FDIC has closed down 72 banks, more than double the number it closed in the first five months of 2009. And to make matters worse, lending is down and unemployment persists.
It all spells trouble for the nation's financial institutions, and investors should be wary ... but not necessarily scared off. Moser believes there are some Foolish ways to get some exposure to this risky, but potentially rewarding, business.
First of all, consider investing in banks you can understand. The big banks have gotten so big, it's hard to know how to value them anymore. Citigroup
And don't forget, you can avoid banks altogether and still get exposure to the financial sector through insurance companies. Companies such as Markel