Tickers in this Article: JPM, NTRS, USB, STT
The hardest hit stocks have been financials as the result of investors rushing to sell their shares after the subprime crisis. Indications are that the worst of the credit crisis is behind us and investors must now begin looking at the beaten down financial sector for opportunities. There are a number of financial stocks that have been able to steer clear of the subprime mess; however they stock price is lower because of the weak sector. (Want more on the rise and eventual crash that was the subprime market, check out our Subprime Mortgages Feature section.)

Worth a Gamble
Here are four financial stocks that do not have a lot in common except they all appear attractive based on their charts and fundamentals.

According to Hoovers, the No. 3 financial services firm in the U.S., JPMorgan Chase & Co. (NYSE:JPM) has been able to weather the subprime storm much better than its peers. In 2008 it added to its wealth of services by buying the nearly defunct Bear Stearns. If the financials continue to fall it could spark a wave of merger and acquisition (M&A) activity as the strongest companies in the sector buy up the weak ones at a huge discount. In the long-term JPM could end up stealing a few companies in the coming year.

Northern Trust (Nasdaq:NTRS) the Chicago-based bank has approximately $4 trillion in assets and has been one of the few banks to outperform the major indices. The company is split into two segments that focus on institutions and the affluent retail client. In April Northern Trust took at stab at the world of exchange-traded funds (ETFs) when they introduced the "NETS" family of funds. The new family of ETFs is focused on investing internationally, but two months into the experiment the ETFs have not yet caught on. The relative strength NTRS has displayed is what makes it so attractive. While most financials have broken to new multi-year lows, NTRS remains in an intermediate-term uptrend and should be able to sidestep any future subprime issues.

U.S. Bancorp (NYSE:USB) the sixth largest commercial bank in the U.S. can boast that its biggest shareholder is one of the greatest investors of all time - Warren Buffett. USB was able to outperform its peers during the market sell-off in March; as a matter of fact it was testing a new 52-week high at the time. However, the stock did fall in early June as it tested the lows set in January 2008. Helping the company diversify out of pure banking is its Elavon subsidiary, a leading processor of credit card transactions. A dividend yield of 5.7% adds to the attractiveness of the stock.

State Street (NYSE:STT) is one of the leading providers of processing and custody services for mutual funds and pensions. The company also dabbles in hedge funds, private equity and ETFs. The spiders (SPDRs) are some of the leading ETFs in their sectors and continue to grow as more investors realize the benefits of the products. The exposure to the ETF arena and its diverse business along with the valuation make it attractive. As a matter of fact, Goldman Sachs (NYSE: GS) placed STT on their buy list in June 2008.

Proceed With Caution
There is always the probability of another downdraft in the sector and/or market. If you are even considering buying into the financials it must be as a long-term valuation play and should consist of not just one company, but several to add diversification. (Learn more on evaluating the financial sector in Analyzing A Bank's Financial Statements.)

comments powered by Disqus

Trading Center