Bank stocks have been lagging big time recently. Since Jan. 1, Bank of America (BAC), JPMorgan Chase (JPM) and Citigroup (C) have all lost ground while the S&P 500 has tacked on roughly 7% in the same period.
But some of these underperformers could be turning around soon. With the Federal Reserve continuing its tapering efforts and the fact it’s likely to cancel all “quantitative easing” bond buying come October, there is a decent chance that rates could tick slightly higher and improve the net interest margin on bank loans.
Additionally, continued long-term improvement in the unemployment rate, consumer spending and business investment is bullish for lending trends — even if the pace of improvement isn’t quite as satisfying as many investors would have liked to see during the past few years.
And besides, if you’re selective, there is a group of financial stocks that have actually been swimming against the current holding back the rest of the sector.
Just because there are problems across most bank stocks doesn’t mean that a selective investor can’t hone in on the sector’s few diamonds in the rough.
So if you’re interested in bank stocks, where should you look? Here are three ideas: