5 Best Mutual Funds to Play the Financial Sector

by Tom Taulli | June 23, 2011 5:52 am

Since March, bank stocks have suffered a terrible correction.  All of the premier companies – such as Wells Fargo (NYSE: WFC[1]) and Citigroup (NYSE: C[2]) – have seen 10%+ losses.

There are many drivers.  For example, Congress is in the midst of legislating tough laws, which should crimp margins.  There are also concerns about the global economy, as well as the debt situation in Europe.

But as indicated in recent columns by InvestorPlace.com editor Jeff Reeves[3] and stock picker Anthony Mirhaydari[4], it looks like much of the bad news already is discounted in the stock prices.  In other words, there might be some nice opportunities for investors – at least for those who are willing to be patient.

A good way to play this is with a mutual fund.  So let’s take a look at some of the standouts:

JHancock Regional Bank

While the U.S. economy continues to be sluggish, it still has pockets of strong growth. Southern states are benefiting from the global energy boom, and the Midwest is seeing strength from agriculture commodities.

This means regional banks should see lots of opportunities. What’s more, they also likely will be the target of buyouts.  If anything, there should be a long-term trend of consolidation in the industry.

To this end, you may want to take a look at the JHancock Regional Bank Fund (MUTF: FRBAX[5]). The portfolio manager, Lisa Welch, is a long-time banking expert and once was an examiner for the New York Federal Reserve Bank.

Fidelity Select Financial Services

Having a focus on banks certainly can be risky because of high volatility.  And it’s still not uncommon to see banks closed because of inadequate capital.

But the financial services industry has a broad assortment of firms, such as brokerages, insurance companies and investment banks.

So it is these kinds of stocks that Fidelity Select Financial Services Fund (MUTF: FIDSX[6]) looks for.  Some of the top holdings include Visa (NYSE: V[7]), Franklin Resources (NYSE: BEN[8]), Evercore Partners (NYSE: EVR[9]) and SLM (NYSE: SLM[10]).

T. Rowe Price Financial Services

The T. Rowe Price Financial Services Fund (MUTF: PRISX[11]) takes a longer-term approach to financial services firms. Its portfolio turnover is about 55.7%.

True, the money manager – Eric Veiel – is new.  But T. Rowe Price knows how to cultivate talent, and the firm has a tremendous staff of analysts.

Mutual Financial Services

The Mutual Financial Services (MUTF: TFSIX[12]) fund focuses on inexpensive financial services firms, from which there’s many stocks to choose.

The mutual fund also looks offshore for investments.  Top holdings include Norway’s Oslo Bors, Australia’s Seven Group and Switzerland’s Zurich Financial Services.

Despite the recent volatility, the mutual fund has had a good track record.  For the past year, it is up 13.41%.

Tom Taulli’s latest book is “All About Short Selling[13]” and he has an upcoming book called “All About Commodities[14].”  You can find him at Twitter account @ttaulli[15].  He does not own a position in any of the stocks named here.

  1. WFC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WFC
  2. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C
  3. InvestorPlace.com editor Jeff Reeves: https://investorplace.com/44558/why-bank-stocks-are-a-buy-bac-c-wfc-jpm-gs-bk-axp-wsc/?cp=msn&cc=synd
  4. stock picker Anthony Mirhaydari: https://investorplace.com/46112/banks-stupid-cheap-zion-tcbi-caty/
  5. FRBAX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FRBAX
  6. FIDSX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FIDSX
  7. V: http://studio-5.financialcontent.com/investplace/quote?Symbol=V
  8. BEN: http://studio-5.financialcontent.com/investplace/quote?Symbol=BEN
  9. EVR: http://studio-5.financialcontent.com/investplace/quote?Symbol=EVR
  10. SLM: http://studio-5.financialcontent.com/investplace/quote?Symbol=SLM
  11. PRISX: http://studio-5.financialcontent.com/investplace/quote?Symbol=PRISX
  12. TFSIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TFSIX
  13. All About Short Selling: http://www.amazon.com/All-About-Short-Selling/dp/0071759344/ref=sr_1_1?s=books&ie=UTF8&qid=1302184310&sr=1-1
  14. All About Commodities: http://www.amazon.com/All-About-Commodities/dp/0071769986/ref=ntt_at_ep_dpi_10
  15. @ttaulli: http://twitter.com/#!/ttaulli

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