With financial stocks being the worst performing sector in 2011, I thought it would be good idea to find financial stocks that would be worth considering in 2012, whether financials continue to underperform or whether they play catch-up with the rest of the market.
For my search, I used the free stock screener from finviz.com, and used the following screener settings:
- I selected only stocks in the Financial Sector category.
- Companies with a market capitalization of $2 Billion or greater.
- A Price/Book ratio of less than 2.
- A PEG (Price/Earnings to Growth ratio) of less than 2.
- Positive Return on Assets.
- Positive Return on Equity.
- Positive EPS growth this year.
- Positive EPS growth quarter over quarter.
- Positive Sales growth this year.
- Positive Sales growth quarter over quarter.
- Long Term debt/Equity ratio of less than 1.
- Dividend Yield of greater than 3%.
There are seven companies that matched all the above criteria, and they are listed below with a short business summary, PE ratio, and dividend yield from Yahoo Finance, and 1-year performance from finviz:
AFLAC Inc. (AFL)
Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. Aflac has a PE of 10.98, and a dividend yield of 3.10%.
2011 Performance: -21.29%
BlackRock, Inc. (BLK)
BlackRock, Inc. is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors. BlackRock has a PE of 14.07, and a dividend yield of 3.10%.
2011 Performance: -3.61%
Bank of Montreal (BMO)
Bank of Montreal, together with its subsidiaries, provides various retail banking, wealth management, and investment banking products and services in North America and internationally. Bank of Montreal has a PE of 10.65 and a dividend yield of 5.00%.
2011 Performance: -0.31%
The Bank Of Nova Scotia (BNS)
The Bank of Nova Scotia, together with its subsidiaries, offers various personal, commercial, corporate, and investment banking services in Canada and internationally. Bank of Nova Scotia has PE ratio of 11.02 and a dividend yield of 4.10%.
2011 Performance: -9.55%
Canadian Imperial Bank of Commerce (CM)
Canadian Imperial Bank of Commerce provides various financial products and services to individual, small business, commercial, corporate, and institutional clients in Canada and internationally. Canadian Imperial Bank of Commerce has a PE ratio of 10.12, and a dividend yield of 4.90%.
2011 Performance: -3.31%
NYSE Euronext, Inc. (NYX)
NYSE Euronext, through its subsidiaries, operates securities exchanges. It operates various stock exchanges, including the New York Stock Exchange (NYSE), NYSE Arca, Inc., and NYSE Amex LLC in the United States; and five European-based exchanges that comprise Euronext N.V. NYSE Euronext has a PE ratio of 10.70 and a dividend yield of 4.60%.
2011 Performance: -9.37%
Royal Bank of Canada (RY)
Royal Bank of Canada provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services under the RBC name worldwide. Royal Bank of Canada has a PE ratio of 16.28, and a dividend yield of 4.20%.
2011 Performance: +1.17%
Thoughts and Observations
All of the above stocks picks, except for AFLAC, outperformed the Financial Select Sector SPDR (XLF), which had a 2011 performance of -17.14%. By design, all of the above stocks had a dividend yield greater than the XLF, which has a dividend yield of 1.57%. The fact that 4 out of the 7 stocks that met all the criteria were Canadian banks isn't much of a surprise, but does say something about the strength of this particular segment.
Disclaimer: The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.
The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.