Given their outlook on potential opportunities, Davis Advisors has focused on the financial sector as a “triple play” opportunity, pointing to attractive earnings, multiples and buybacks/dividends.
S&P 500 financial companies are currently trading at the greatest discount to the broader market, reflecting their cheap valuations. Additionally, banks and insurers are also paying out some of the lowest dividends, which leaves them more room to grow their payouts in the years ahead.
In the same survey of financial advisors, 35.5% believed financials were undervalued while 43.9% said the sector is fairly valued.
Davis Advisors’ preference for the financial sector is also reflected in their recently launched active Davis Select U.S. Equity ETF (NasdaqGM: DUSA), Davis Select Financial ETF (NasdaqGM: DFNL), and Davis Select Worldwide ETF (NasdaqGM: DWLD).
DUSA includes high-conviction U.S. large-cap stocks. Top holdings include Berkshire Hathaway 9.6%, Amazon 7.5% and Alphabet 7.3%. The portfolio leans towards financials at 38.7%, followed by industrials 14.8% and energy 13.4%.
DFNL includes the best-of-breed financial companies, including Markel Corp 6.7%, American Express 6.0% and Loews 5.8%, with a focus on diversified financials, insurers and banks.
Financial advisors who want to learn more about Davis Funds’ investment strategy and outlook can watch the Tuesday, February 14 webcast on-demand here.