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5 Most-Held Financial Stocks as Interest Rates Set to Rise

- By Holly LaFon

The market forces that spurred an investor retreat in stocks Thursday proved a boon for only one sector in the S&P 500 index, financial services.

Major market average declined as bond yields shot up, with the 10-year Treasury yield increasing above 3.2% for the first time since 2011. The rise resulted from a strong economy and a signal from Federal Reserve chair Jerome Powell that more interest rate hikes are likely ahead. By trading day's end, the Dow Jones Industrial Average had slipped 0.75%, for a year-to-date gain of 8.07%. The S&P 500 (SPY) also settled down 0.78% for a year-to-date gain of 8.54%.


As Warren Buffett (Trades, Portfolio) has noted, interest rates can act as "gravity" on stock prices, as higher rates can increase the cost of borrowing for companies and negatively affect earnings. Financial services companies are one area that benefits from the change. Banks tend to see higher spreads between what they pay to hold money from customers and what they earn from debt, boosting profits.

Insurance stocks, like Berkshire Hathaway (BRK-A)(BRK-B), will benefit from higher interest rates as they can earn augmented rates of return on their cash holdings and receive more back from the investment of their float in short-term debt.

As the investing environment changes to adjust for higher interest rates, GuruFocus data highlights the financial services stocks that the most tracked investors hold. They are: Wells Fargo (WFC), Bank of America (BAC), JPMorgan (JPM), Visa (NYSE:V) and Citigroup (NYSE:C).

Wells Fargo (WFC)

Of the prominent investors tracked by GuruFocus, 47 own shares of Wells Fargo. During the second quarter, 23 bought the stock and 22 sold shares.

Buffett has the largest holding with 9.39% of the bank's shares, followed by Dodge & Cox with 1.66% of shares. First Pacific Advisors (Trades, Portfolio) and Steven Romick (Trades, Portfolio) started the largest stakes in the company in the second quarter, while Ray Dalio (Trades, Portfolio) chopped 92.98% of his holding and Richard Snow (Trades, Portfolio) reduced his by 30.22%.

Wells Fargo & Co. has a market cap of $258.24 billion; its shares were traded around $53.62 Friday after falling 12.41% year to date. Shares rose 0.7% over the past five trading days. It has a price-earnings ratio of 13.5 and price-sales ratio of 3.09. The trailing 12-month dividend yield is 2.98%. The forward dividend yield is 3.21%.

Bank of America (BAC)

Forty-two investors tracked by GuruFocus own Bank of America shares. During the second quarter, 10 purchased shares and 26 sold.

Buffett, again, holds the largest position with 6.8% of its outstanding shares, followed by Dodge & Cox with 1.33%. Paul Tudor Jones (Trades, Portfolio) and Scott Black (Trades, Portfolio) established positions in the second quarter, while the Signature Select Canadian Fund (Trades, Portfolio) sold out.

Bank of America shares traded around $30.23 on Friday morning after gaining 1.77% year to date and 1.62% in the last five trading days.

Bank of America Corp. has a market cap of $302.17 billion; its shares were traded with a price-earnings ratio of 15.59 and price-sales ratio of 3.61. The trailing 12-month dividend yield is 1.69%. The forward dividend yield is 1.97%.

JPMorgan (JPM)

Forty-one investors GuruFocus tracks own shares of JPMorgan. There were 12 buys and 22 sales in the second quarter.

Dodge & Cox has the largest holding among investors GuruFocus tracks, with 0.75% of shares, followed by Primecap Management, which holds 0.69%. Signature Select Canadian Fund (Trades, Portfolio), Scott Black (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) starts positions in the second quarter, while Caxton Associates (Trades, Portfolio) cut its holding by 83.39% and Jeremy Grantham (Trades, Portfolio) reduced by 44.78%.

JPMorgan shares traded for $114.63 Friday, after gaining 6.78% year to date and 1.23% in the past five trading days.

JPMorgan Chase & Co. has a market cap of $384.55 billion; its shares were traded with a price-earnings ratio of 15.25 and price-sales ratio of 3.80. The trailing 12-month dividend yield is 2.16%. The forward dividend yield of JPMorgan Chase & Co. is 2.78%.

Visa (NYSE:V)

Likewise, Visa has 41 investors holding its shares. Eleven purchased some during the second quarter and 22 sold.

Investor Frank Sands (Trades, Portfolio) has the most expansive holding with 0.81% of the company's shares outstanding, and Ken Fisher (Trades, Portfolio) follows with 0.77%. In the second quarter, Daniel Loeb (Trades, Portfolio) started a position. Jim Simons (Trades, Portfolio) chopped 89.96% of his holding and Louis Moore Bacon (Trades, Portfolio) reduced his by 70%.

Shares of Visa soared 28.16% year to date to $144.89 Friday. They slid 3.88% over the past five trading days.

Visa Inc. has a market cap of $332.26 billion; its shares were traded with a price-earnings ratio of 35.53 and price-sales ratio of 16.94. The trailing 12-month dividend yield of Visa is 0.56%. The forward dividend yield is 0.57%. Visa Inc. had an annual average earnings growth of 32.10% over the past five years.

Citigroup Inc. (NYSE:C)

The bank has 35 GuruFocus shareholders, with 15 buying in the second quarter and 18 selling shares.

Jeff Ubben (Trades, Portfolio) has the largest position among investors tracked by GuruFocus, with 1% of Citigroup's outstanding shares, followed by firm Barrow Hanley Mewhinney & Strauss at 0.52%. Tom Gayner (Trades, Portfolio) and John Buckingham (Trades, Portfolio) were among investors starting positions in the second quarter, while the Signature Select Canadian Fund (Trades, Portfolio) sold out.

Citigroup shares slipped 2.34% year to date to $72.42 per share Friday. Over the past five years, they gained 0.28%.

Citigroup Inc. has a market cap of $182.25 billion; its shares were traded with a price-sales ratio of 2.57. The trailing 12-month dividend yield is 1.93%. The forward dividend yield is 2.48%.

Read more here:

  • Warren Buffett's Stocks at 52-Week Lows Include Wells Fargo, Goldman Sachs

  • 4 Manufacturing Companies Gurus Agree On

  • US Markets Start 4th Quarter Significantly Overvalued


This article first appeared on GuruFocus.


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