Royal Bank Scotland Group PLC (Pref.) (RBS.PR.F)

(Top pick, February 28, 2007. Down 48%) Made an acquisition they didn’t need to which stretched the balance sheet.

Facing problem with sub-prime mortgages. Very well diversified bank. Not feeling pain from fundamental view. Mortgages have done well. Grown yearly in earnings 10-15% in last 7 years, will continue over next 5. Given mass stock sell-off the opportunity is strong.

A great value at this time. Has underperformed for the last little while because of a basic misunderstanding of their business, i.e., they're not a consumer oriented bank. Particularily good at making acquisitions and putting them into their system.

It's OK, but in European banks, prefers Fortis (?) and Banco Bilboa Vizcaya (BBV-N) which are more globally oriented.