At this time of year, investors zeroing in on specific sectors and industries often turn to consumer discretionary and retail exchange traded funds. They might want to add banks and the Invesco KBW Bank ETF (NASDAQ: KBWB) to their holiday shopping lists.
The reason is simple. Bank stocks have a penchant for performing well in the final month of the year. That includes Dow component JPMorgan Chase (NYSE:JPM), the largest domestic bank by assets and KBWB’s third-largest holding at a weight of 7.79%.
“If past is precedent, bank stocks can finish the year strong. With a little over a month left in 2021, data compiled by Schaeffer’s Senior Quantitative Analyst shows bank stocks tend to historically outperform the final month of the calendar year,” according to Schaeffer’s Investment Research.
If that trend holds up, KBWB, which tracks the KBW Nasdaq Bank Index, could benefit. As it is, the Invesco fund is up 32.29% year-to-date, good for one of the best showings among financial services ETFs.
Of the 25 best-performing S&P 500 stocks in December over the past decade, nine are bank stocks, according to Schaeffer’s. Each of those nine, including JPMorgan Chase, are members of KBWB’s roster. That’s saying something because the ETF holds just 25 stocks.
In addition to JPMorgan Chase, another bank stock with a reputation for performing well in the final month of the year is Keycorp (NYSE:KEY). In fact, that KBWB component is one the best-performing members of the S&P 500 in December over the past 10 years.
“KEY is worth a closer look. It’s average December return the last 10 years is a modest 2.2%, but it’s one of two stocks with a 90% win rate,” notes Schaeffer’s.
Other KBWB holdings that appear on the Schaeffer’s list of S&P 500 members with reputations for delivering December upside include PNC Financial (NYSE:PNC), Regions Financial (NYSE:RF), Truist Financial (NYSE:TFC), and Zion Bancorp (NASDAQ:ZION).
Nearly all KBWB member firms dwell in large- or mid-cap territory, as highlighted by the fund’s average market capitalization of $122.78 billion. Nearly 62% of KBWB holdings are classified as value stocks, and none are labeled as growth stocks.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.