Bank stocks off to hot start this yearPosted by: RJ and Makay on Feb 22, 2012  
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Financial stocks are off to a hot start this year. The easing of the European debt crisis, improvement in the U.S. economy and the recent $25 billion settlement by large U. S. mortgage lenders has had a bullish effect on asset managers. During the seven-week period ended February 15, fund managers purchased about $3.2 billion net shares in banks, according to fund tracker EPFR Global.
In the year ago seven-week period, asset managers unloaded $199 million net shares of banks. For all of 2011, they sold a net $15.3 billion of bank shares. The sector, which was weighed down by fears of a double-dip recession last year and the European debt crisis more recently, is enjoying a healthy rebound.
The KBW Bank index is up 16% year to date, outpacing the Standard and Poor’s 500 which is up 8.2% since the beginning of the year.
Citigroup (C) and Bank of America (BAC), up 25% and 44% respectively this year, have fueled the sector’s rise.
Fairholme Fund manager Bruce Berkowitz has had one of the most impressive snapbacks. The fund lost 32% of its value last year. In the first eight weeks of this year, the fund is up 20%, powered by key holdings American International Group (AIG), Citigroup and Bank of America.
Hodges Small Cap fund co-manager Craig Hodges has had good results by focusing on strong, smaller niche firms. His fund, with $99.4 million in assets, is up 14% so far this year.
“We thought, now’s a pretty good time to be sticking our necks out on some of these financial companies,” Hodges says.
Some fund managers remain wary of financial stocks. A recent Bank of America Merrill Lynch survey found that 36% of 296 surveyed fund managers are “underweight” bank stocks. Benjamin Hess, a financial sector research analyst at Fidelity Investments, predicts that the sector “will remain volatile.”
Yesterday, a technical signal known as a “Golden Cross” occurred in the SPDR Financial ETF (XLF). The signal occurs when a stock or indexes’ 50-day moving average has moved above its 200-day moving average, a confirmation of upward momentum. Historically, it is a very bullish indicator.
Since 1975, 94% of “Golden Cross” occurrences were followed by a 13% gain (on average) in the S&P 500 one year out, according to Shaeffer’s Investment Research.
Source:
Why fund managers are still upbeat on financials (http://online.wsj.com/article/SB10001424052970204059804577225710427197958.html). WSJ, February 18, 2012
‘Golden Cross’ shows up in Financial ETF, finally (http://blogs.barrons.com/focusonfunds/2012/02/21/golden-cross-shows-up-financial-etf-finally/). Barron’s, February 21, 2012
