Big Bank Stocks Have Another 10-15% Upside (XLF, C)

Share This Article
March 15, 2013 12:53pm NYSE:XLF

bankOne of the most surprising things about the latest leg of the stock market rally is that bank stocks have been leading the charge. Normally a group at the core of any financial catastrophe is left for dead years after the crisis. In this case, the

financial sector that created the trash funding that fueled the housing bubble, has been outperforming the broader market year-to-date, over the last 12 months, and since the start of 2012.

Fred Cannon, chief equity strategist at KBW, says one of the best things the sector has going for it is just how far the stocks had been beaten down in the first place. “While the market is making new highs, banks and financials are not,” he notes. Measured by the Financial Select Sector SPDR (NYSEARCA:XLF) or the KBW Bank Index (INDEXDJX:BKX), financials are still almost 50% below their high water marks despite more than doubling from March 2009 lows.

Coming off what Cannon describes as a low base can only take a stock sector so far. Every tick higher moves the big bank stocks closer to levels where the fundamentals will need to justify continued buying. Taking excessive leverage out of an industry makes for a more solid footing, but also makes for less profitable operations.

As for picks, Cannon wants to focus on the Big Boys. “Citigroup Inc. (NYSE:C) we think has legs at least to get back to book value, so you have at least 10 – 15% upside for some of these big banks.”

You can see the full “Breakout” interview below:

Read Next

Get Free Updates

Join over 50,000 investors who get the latest news from!

Most Popular

From Our Partners

Explore More from

Free Daily Newsletter

Get daily ETF insights from our market experts. Never miss another important market development again! respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories