Miller suggests playing the SPDR KBW Bank (NYSEArca: KBE) to gain exposure in major banks. KBE includes 26 names and has all the big bank names you’d expect, such as Bank of America (NYSE: BAC) is 9.06%, Wells Fargo (NYES: WFC) is 7.92% and Citigroup (NYSE: C) is 7.93%. The ETF has a price-to-earnings ratio of 16 and an earnings growth rate of 8%. Dividends are 1%.
Regional banks can be an appealing option, too. They’re smaller, so they’re less likely to come under the scope of Obama’s new proposals. Regional banks also were relatively unscathed during the financial fallout of 2008, and have so far reported fourth-quarter earnings that exceed expectations.
- SPDR KBW Regional Banking (NYSEArca: KRE)
- iShares Dow Jones U.S. Regional Banks (NYSEArca: IAT)
If you’re looking for opportunities in the financial sector, a simple strategy we recommend is trend following: when a position is above its 200-day, it’s a buy signal; when it’s below or 8% off the recent high, it’s a sell. [How to Follow Trends.]
For more information on banks, visit our financial category.
Max Chen contributed to this article.