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Real Time Insight

I am bullish on Finance, and I think you should be too.

Let me list the reasons....

In 2013, the Financials have been high beta stocks. Consider that the SPDR Financial ETF (ticker XLF) is up nearly +20% in 2013, and is up +40% over the last year. 

Now, look forward.  Finance earnings fundamentals look great. 

Earnings estimates for the sector are moving up.  Total earnings for the Finance sector could be up +19.1% in Q2 after +7.7% total earnings growth in Q1. The revisions trend is decidedly in the positive category for the sector. 

As the second largest group in the S&P 500, Financials can lead earnings improvement in 2H-13.  Four big U.S. banks (BoA, Citi, Wells Fargo, and JP Morgan) could account for 25% of S&P500 earnings improvement.

The U.S. momentum in the Finance Sector flows from numerous sources:

  • The booming U.S. stock market is one source;
  • The U.S. economy adds more jobs month-on-month;
  • An uptrend in long-term risk-free interest rates following the Fed’s ‘Taper’ buzz improved the operating backdrop;
  • Housing shows ongoing improvement;
  • Banking policy and money printing at the U.S. Fed, in Europe, and in Japan has a positive effect on earnings. 

Investment Funds, Investment Banking & Brokering, Real Estate and Insurance industries showed up even stronger in the Zacks Industry Ranks in early June.

This is the number one Zacks Sector right now.

In addition, buy-side investment strategists surveyed in June 2013 marked Financials as an Outperform category.

Overcapacity in the Financials sector, a risk of over-regulation from Dodd-Frank implementation, and the lack of internal earnings growth visibility are the significant headwinds. 

There is arguably no stronger sector right now!

My RTI Question For You? 

With all this good news, are you banking on Finance for the rest of 2013? 

If you are, how are you investing in it?  What stocks interest you?  What banking fundamentals do you find most convincing?

If you are not investing in Finance, where are you leaning towards for returns outperformance in the rest of 2013?

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