ETF Trends
ETF Trends

Financial sector stocks and related exchange traded funds have largely fallen behind the broader market this year. However, this area of the market is beginning to look like a good value play.

The Financial Select Sector SPDR (NYSEArca: XLF) has increased 8.0% year-to-date, compared to the 8.9% rise in the S&P 500. [Financial ETFs Could Outperform Ahead of Fed Tightening]

While the broad markets have been hovering near record highs, with the broader equities market looking a little pricier. many financial stocks remain relatively cheap. For instance, Wells Fargo (NYSE: WFC) is trading at 13 times earnings while JPMorgan (NYSE: JPM) is hovering around 15 times, whereas the S&P 500 index is trading at about 17 times earnings, reports Bryan Borzykowski for CNBC.

XLF, which has a 8.7% position in WFC and 7.9% in JPM, shows a price-to-earnings ratio of 15.2.

Looking ahead, Andrew Sleeman, a portfolio manager with Franklin Mutual Financial Services Fund, argues that bank stocks still have a lot of room to grow.

“The economy is starting to pick up, we’re starting to see some loan growth, and an interest-rate rise could lift the whole sector,” Sleeman said in the article. “If rates do climb, then financials could be the sector to be exposed to.”

Erik Oja, a banking industry analyst with S&P Capital IQ, believes that while the sector’s valuations have been fairly volatile since the economic downturn, financial stock valuations are now stabilizing.

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