Fun With Financials in 2014

Against the backdrop of rising rates, ETFs holdings regional banks and insurance providers surged in 2013. With Treasury yields expected to keep climbing this year, regional banks and insurance firms that have seen profits hampered by low rates are expected to thrive. [Regional Bank ETFs Rally to Finish 2013]

S&P Capital IQ has a five-star rating on Hartford Financial (NYSE: HIG). That stock is a top-10 holding in the iShares U.S. Insurance ETF (NYSEArca: IAK). IAK allocates almost 12% of its weight to American International Group (NYSE: AIG), is home to $162.6 million in assets and also garnered an overweight rating from S&P Capital IQ.

S&P also rates the iShares U.S. Regional Banks ETF (NYSEArca: IAT) and the iShares U.S. Financial Services ETF (NYSEArca: IYG) overweight. IYG is a competitor to XLF and VFH as the former features many of the same holdings, though at different weights, as its SPDR and Vanguard rivals.

Although IAT’s name implies it is a regional bank ETF, the fund’s largest holdings are more accurately classified as super regionals. For example, US Bancorp (NYSE: USB) and PNC Financial (NYSE: PNC) combine for nearly 31% of IAT’s weight.  The $490.3 million ETF is up 29.7% in the past year.

iShares U.S. Regional Banks ETF



Tom Lydon’s clients own shares of American Express.