For those that do not want to brave the polar vortex that would be associated with a visit to Wall Street but still want to participate in upside with investment banking stocks, there are some exchange traded funds that will do the trick.
Since 2014 is expected to be another strong year for the financial services sector, ETFs heavy on investment banks and broker-dealers merit near-term consideration.
“We have a positive 2014 fundamental outlook on the Investment Banking & Brokerage sub-industry. We believe equity and fixed income underwriting are performing strongly, with some landmark transactions announced in 2013, while mergers and acquisitions (M&A) can improve further on top of gains in 2013,” said S&P Capital IQ in a new research note.
S&P Capital IQ recently boosted its rating on the U.S. financial services sector to overweight from marketweight. Earlier this week, the research firm sounded a bullish tone on ETFs holding major money center banks, regionals and property and casualty insurance providers. [Fun With Financials ETFs in 2014]
Among individual investment banking names, S&P has four-star ratings on new Dow component Goldman Sachs (NYSE: GS) and rival Morgan Stanley (NYSE: MS). The research firm also has a three-star rating on IntercontinentalExchange Group (NYSE: ICE). Those stocks are three of the top four holdings in the iShares U.S. Broker-Dealers ETF (NYSEArca: IAI), combining for 21.5% of the ETF’s weight.
IAI is rated marketweight by S&P Capital IQ, although it was 2013’s top-performing financial services ETF. Even with that honor, many of the fund’s 22 constituents trade at reasonable valuations. For example, Goldman trades around 12 times 2014 earnings. For its part, Morgan Stanley has reported four consecutive quarters of higher earnings and revenue. [2013’s Best Financial Services ETF]