All the major U.S. indices – S&P 500, the Dow Jones Industrial Average (DJIA) and NASDAQ – closed significantly lower on Wednesday as the latest news from Washington made investors apprehensive. Both S&P and DJIA declined roughly 1.8% (their biggest fall since Sep 2016), while the NASDAQ declined over 2.5% (its worst trading session since last June).
The news from Washington about President Donald Trump interfering with a federal probe along with calls for independent investigation related to probable collusion between his election campaign and Russia jolted investors.
These matters create uncertainty about Trump's ability to deliver on proposed tax and banking sector reforms, and infrastructure spending. With banks expected to be one of the biggest beneficiaries from these changes, banking stocks took a major hit. The Financial Select Sector SPDR Fund (XLF - Free Report) tanked 3.2% and the KBW Nasdaq Bank Index plunged 4.1%.
Nonetheless, this dip provides a buying opportunity for banking stocks. Fundamentally banks have become stronger and are delivering improving results, with the recently concluded earnings season would concur.
Apart from this, an improving rate scenario and gradually improving operating environment are expected to support the banks’ financials in the upcoming quarters.
Choosing the Winning Stocks
Since November, banking stocks have been rallying, making them highly priced. So now is the time to add a few of them, as all of them have dipped.
But picking up potential winners among the huge number of banks could be daunting. Hence, we have taken the help of the Zacks Stock Screener to easily select such stocks.
We have shortlisted stocks with year-over-year earnings growth of 15% or more in the recently concluded quarter and a VGM Score of ‘A’ or ‘B.’ Further, these stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are the top three stocks:
Customers Bancorp, Inc. (CUBI - Free Report) , based in Wyomissing, PA, provides financial products and services to small and middle market businesses, not-for-profits, and consumers. The company carries a Zacks Rank #2 and has a VGM Score of ‘B.’ Further, the company recorded 24.6% year-over-year earnings growth in first-quarter 2017.
Based in South Bend, IN, 1st Source Corporation (SRCE - Free Report) offers commercial and consumer banking services, trust and investment management services, and insurance to individual and business clients. The company carries a Zacks Rank #2 and has a VGM Score of ‘B.’ Further, the company reported 17% year-over-year earnings rise in first-quarter 2017.
People's Utah Bancorp (PUB - Free Report) , headquartered in American Fork, UT, provides commercial and retail banking products and services in the U.S. The company carries a Zacks Rank #2 and has a VGM Score of ‘B.’ Further in first-quarter 2017, the company reported 24.1% year-over-year earnings growth.
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