There has been a lot of buzz lately around the financials due to the fact that they are still trading at lower valuations than stocks in other industries. Just recently banking analyst Dick Bove declared that bank stocks will double in the near term. While I have a long term approach I believe bank stocks do stand to outperform in the next few years.
My portfolio is slightly overweight towards bank stocks right now. My money is in the banks that have been growing earnings and boosting dividends each year for the last few years. I’m long JPMorgan Chase (JPM), Community Trust Bancorp (CTBI), First Interstate Bancsystem (FIBK) and Cullen Frost (CFR).
I’ve also accumulated a few Multi-Family REITs that stand to benefit from higher interest rates. Since interest rates hikes are inevitable and I have a 5-15 year outlook for most of my investments I’m much more interested in what these stocks will do during my investment timeline than what they will do in the next 1-2 years. I’m long Federal Realty Trust (FRT) and Home Properties (HME). I also have a small stake in Digital Realty Trust (DLR) and Simon Property Group (SPG).
For general exposure to the financial sector I also took a position in the Financial Select Sector (XLF) ETF. While I have picked many specific names in this space I still wanted to add more general exposure to this space.
Where do you see Financials headed in the next few years and how are you positioning your portfolio?
