With an interest rate hike likely on the horizon, financial stocks are booming among the gurus according to GuruFocus’ Industry Trends feature. This page ranks industries by net buys, or the number of new holdings minus the recent sell-outs of related stocks.
The top three sectors by net buys as of the second quarter are banks, asset management and brokers and exchange-related companies.
Banks
Banking stocks are the favorite among the gurus, with 34 net buys as of the second quarter. In GuruFocus’ recent interview with contrarian investor David Dreman, the Forbes columnist and author said U.S. banks are currently attractive, as they have recovered from the Great Recession due to help from the Federal Reserve.
Dreman’s sentiments were proven in the recent buys from gurus. Stanley Druckenmiller (Trades, Portfolio) took large stakes in several banks during the second quarter such as Wells Fargo (WFC, Financial), Citigroup (C, Financial) and JPMorgan Chase & Co. (JPM, Financial). Wells Fargo was his largest bank buy, which now accounts for 6.36% of his portfolio. Other gurus who picked up shares of Wells Fargo include Louis Moore Bacon (Trades, Portfolio) and Ken Heebner (Trades, Portfolio).
Three gurus also picked up shares of PNC Financial Services Group (PNC, Financial) — Manning & Napier Advisors, Stanley Druckenmiller (Trades, Portfolio) and Signature Select Canadian Fund (Trades, Portfolio). The bank’s EPS has been on a consistent upward trend since the end of the financial crisis in 2009.
As of today, the sector is also trading on the cheaper end with a median PE of 13.2. This is just behind insurance, asset management and oil and gas. The median dividend yield for bank stocks is 2.77%, while the median five-year revenue growth rate was 1.7%.
Asset management
As of the second quarter, there were 28 net buys in asset management stocks. Notable purchases include new holdings in Ameriprise Financial (AMP, Financial), with investors such as Steven Cohen (Trades, Portfolio), Jeff Auxier (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) taking new positions in the company.
Ameriprise’s EPS has increased steadily since 2009, reporting at $8.30 per share last year. The stock declined 3% over the past year and now trades at 12x earnings.
Five gurus also purchased Bank of New York Mellon (BK, Financial) during the quarter, including Larry Robbins (Trades, Portfolio) and Mason Hawkins (Trades, Portfolio).
Of the three most popular sectors, asset management is the cheapest, with stocks in the industry trading at a median 12.5x earnings.
Brokers and exchanges
Among the 23 net new buys in the brokers and exchanges sector were new positions in Charles Schwab (SCHW, Financial), Goldman Sachs (GS, Financial) and Virtu Financial (VIRT, Financial).
Five gurus invested in Charles Schwab during the quarter, while no investor sold out the stock. The stock has increased 11% over the past year and currently trades at $28.09, which is about 29x earnings.
In 2014, Goldman Sachs earned $17.07 per share, a good increase from $15.46 per share the year before. Ken Heebner (Trades, Portfolio) took the largest new position during the second quarter, buying 728,000 shares. Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio) also added the stock to their portfolios.
The median PE for the sector is 16.5, while the median five-year revenue growth rate is 1.5%.
Visit the Industry Trend page to see the most popular sectors among the gurus. Not a Premium Member of GuruFocus? Try it free for 7 days.
