4 Reasons to Ride Regional Banks Right Now

by Johnson Research Group | August 27, 2013 9:06 am

We’re hearing all kinds of talk about the larger-cap financials like Bank of America (BAC[1]), JPMorgan (JPM[2]) and Goldman Sachs (GS[3]) lately as potential changes to legislation, the potential housing slowdown and rising interest rates offer reasons to reconsider your holdings.

But rather than throwing the banking baby out with the bathwater, we’d instead suggest a look at regionals as a profitable alternative to the large financials.

The SPDR S&P Regional Banking ETF (KRE[4]) — which holds banks such as California’s CapitalSource (CSE[5]), southern operator Synovus Financial (SNV[6]) and the Midwest’s FirstMerit (FMER[7]) — has been on fire lately, posting 31% year-to-date returns vs. 21% for large financials (XLF[8]) and 16% for the S&P 500.

So, why the regionals? A number of reasons.

So, how do we play this strong ETF sector?

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Keep it simple and just play the KRE! The recent pullback in the market created a small opportunity for investors looking to add exposure to the regional banks. KRE is priced at $36.55 — just below its 20-day moving average. The fund still has potential support from its 50-day, which is trending higher, at the $35.70 level.

We would consider current prices as an attractive buying point for KRE, with a target of $39 over the short-term outlook.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

  1. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  2. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  3. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  4. KRE: http://studio-5.financialcontent.com/investplace/quote?Symbol=KRE
  5. CSE: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSE
  6. SNV: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNV
  7. FMER: http://studio-5.financialcontent.com/investplace/quote?Symbol=FMER
  8. XLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLF
  9. cause a short squeeze to engage: https://investorplace.com/2013/08/short-interest-data-short-squeeze/

Source URL: https://investorplace.com/2013/08/cash-in-on-regional-banks-strength/
Short URL: http://invstplc.com/1nvGvuR