Banking

Buffett Stock, JPMorgan Lead These Top Financial Plays Near Buy Points

Investors have a chance to bank on top financial stocks such as Warren Buffett stock Berkshire Hathaway (BRKB), as several funds set up buy points.




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Financial Select Sector SPDR Fund (XLF) is finding support at its 10-week moving average, which sets up a chance for investors to add or buy shares. The $40.4 billion fund advanced 32% this year through its late-August high, outpacing the S&P 500’s 20% gain for the same period.

XLF tracks the Financial Select Sector Index, which aims to represent the financial sector of the S&P 500 index. The ETF holds 65 stocks and has a median market cap of $35.3 billion.

Banks made up the biggest sector weight as of Sept. 14 at just over 37% of total assets, followed by about 27% in capital markets. Insurance weighed in at 17%, diversified financial services 13% and consumer finance 6%.

Buffett Stock In Top Five

The two biggest holdings are Buffet’s Berkshire Hathaway and JPMorgan (JPM), one of the Dow Jones Industrial Average stocks. Bank of America (BAC), Wells Fargo (WFC) and Morgan Stanley (MS) rounded out the top five.

Berkshire stock is shaping a cup with handle with a 291.92 buy point, according to MarketSmith chart analysis. It’s about 4% away from the entry.

JPMorgan is approaching a 163.93 buy point of a cup with handle. Bank of America is consolidating, Wells Fargo has pulled back below a flat-base entry, and Morgan Stanley is extended from a 94.37 buy point of a flat base.

The top 1o holdings, which include Dow stock Goldman Sachs (GS), accounted for more than half, or 54%, of assets. XLF charges a 0.12% expense ratio.

Similar To XLF

Vanguard Financials ETF (VFH) is also testing support at its 10-week line. The $10.7 billion fund gained 32% this year through its late-August peak. VFH tracks the MSCI US Investable Market Index (IMI)/Financials 25/50, made up of large-, mid- and small-cap U.S. financial companies.

Its portfolio contains 397 stocks with a median market cap of $76 billion. The ETF’s biggest sector weights as of July 31 were diversified banks at 23.5%, regional banks at 13.9%, and 10% in asset management & custody banks. About 9% each were in two groups — financial exchanges & data and investment banking & brokerage.

The top five holdings (as of July 31) were very similar to XLF. They were JPMorgan, Berkshire Hathaway, Bank of America, Wells Fargo and Citigroup (C). The top 10 holdings represented nearly 42% of total assets. VFH charges a 0.10% expense ratio.

Two other financial ETFs — SPDR S&P Regional Banking (KRE) ($4.1 billion) and SPDR S&P Bank (KBE) ($3.1 billion) — are also testing support at their 10-week lines.

KRE’s top holdings include Signature Bank (SBNY), First Republic Bank (FRC) and SVB Financial (SIVB). Meantime, KBE counted Mr. Cooper Group (COOP), Silvergate Capital (SI) and New York Community Bancorp (NYCB) among its top names.

Both funds charge a 0.35% expense ratio. KRE returned 23% through Wednesday’s close, while KBE was up 21%.

Follow Nancy Gondo on Twitter at @IBD_NGondo

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