Over the past few years, few sectors have vexed value investors quite the way the banking sector has.

The old thesis that you should buy the dips of established companies because they will inevitably bounce back has been the downfall of many investors. The best example remains Bill Miller of Legg Mason, who was burned badly toward the end of his amazing career by financial stocks. He stuck to the value mantra and bought financial stock when they looked amazingly cheap by conventional measures, only to ride them down even farther, in some cases into oblivion.

Perhaps with such experiences in mind, big fund managers remain wary of these stocks even as they plummet well below book values. The sector has fallen 20 percent this year, the most of any sector in the S&P 500, Reuters notes. The index has fallen 1.8 percent this year, but it would have risen 3.3 percent if financials were excluded, according to Standard & Poor's Equity Research. Assets in bank-oriented mutual funds have fallen 40 percent in the last six months.

At this point, we have to ask: How low will these socks have to fall before the value investors are goaded into buying? At some point, the floodgates will open. It may simply take a stronger recovery and more progress on the mortgage/foreclosure settlement front.

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