Currently, the Nasdaq has moved up 0.4%, the S&P 500 has remained steady and the Dow has moved little. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
These are the biggest movers in the Financial sector (XLF) (+0.2%):
|Company||Market Cap||Percentage Change|
|Tower Group Inc (Nasdaq:TWGP)||$856.2 million||-14.4%|
|Humana (NYSE:HUM)||$11.51 billion||-12.7%|
|LPL Investment Holdings Inc. (Nasdaq:LPLA)||$3.54 billion||-12.7%|
|National Financial Partners Corp. (NYSE:NFP)||$560.7 million||+7.6%|
|Mercury General Corporation (NYSE:MCY)||$2.11 billion||-5%|
|PartnerRe Ltd. (NYSE:PRE)||$4.82 billion||-4.7%|
|Banco Santander-Chile (ADR) (NYSE:BSAC)||$14.24 billion||-4.1%|
Forex Broker Summary: Forex Capital Markets (FXCM)
Taking a 14.4% hit, Tower Group (Nasdaq:TWGP) is currently trading at $18.59 per share. So far today, 444,949 shares have changed hands, more than yesterday's 149,777 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. The debt-equity ratio of 40% is relatively low. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Shares of Humana (NYSE:HUM) are currently trading at $61.60, a steep decline of 12.7%. This morning, the company's volume is 5.1 million shares. This is 2.5 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. HUM has a low capitalization ratio of 16.4%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
LPL Investment Holdings (Nasdaq:LPLA) is at a share price of $27.98 after a sharp decline of 12.7%. The company's volume for the day so far is 1.3 million shares, 8.2 times its average over the past three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Valuation ratios like the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield are useful in determining how attractive a potential or existing investment is. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. LPLA is in line with the industry average with a P/E ratio of 22.7. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
National Financial (NYSE:NFP) has increased to a share price of $14.86, a 7.6% rise. So far today, 130,655 shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. In making a decision about a potential or existing investment, valuation ratios are useful as a basis for seeing whether the stock price is too high, reasonable, or a bargain. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. PEG ratio for NFP is consistent with the industry average at 2.13. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Mercury (NYSE:MCY) is down 5% to reach $36.52 per share. At 267,589 shares, the company's volume so far today is lighter than yesterday's volume of one million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Valuation ratios include the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. The P/B ratio for MCY is 1.06, indicating that the stock is trading for more than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Using The Price-To-Book Ratio To Evaluate Companies
PartnerRe (NYSE:PRE) has decreased to $71.25 per share, a 4.7% fall. So far today, the company's volume is 525,658 shares. This is 1.3 times its current daily average. The trading volume for a stock indicates the level of investor interest. A company's investment value can be estimated using valuation ratios such as the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. PRE has a dividend yield of 3.3%. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Investment Valuation Ratios: Dividend Yield
Currently trading at $75.31 per share, Banco Santander-Chile (NYSE:BSAC) has fallen 4.1%. So far today, the company's volume is 162,397 shares, 1.4 times the average volume over the last three months. If a stock is trading on low volume, then there is not much interest in the stock. On the other hand, if a stock is trading on high volume, then there is a lot of interest in the stock. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. A price/sales ratio is derived by dividing stock market price by company sales. BSAC has a high P/S ratio of 3.28. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.