iShares Dow Jones US Reg Banks Ind.(ETF) (IAT) — This ETF seeks to track the results of the Dow Jones U.S. Select Regional Banks Index.
The top 10 holdings in IAT are U.S. Bancorp (USB), PNC Financial Services Group Inc (PNC), BB&T Corporation (BBT), SunTrust Banks, Inc. (STI), M&T Bank Corporation (MTB), Fifth Third Bancorp (FITB), Regions Financial Corp (RF), KeyCorp (KEY), Citizens Financial Group Inc (CFG) and First Republic Bank (FRC).
Generally these banks trade at a reasonable valuation to their book values and have very high capital levels. They are considered “super regional banks” in that they are smaller than national or global banks, but still offer a wide variety of services and are generally larger and more diverse than those banks that make up the SPDR KBW Regional Banking (ETF) (KRE), which I featured as the Trade of the Day on Nov. 19.
IAT is up about 4% in the past month. This makes sense given the 9%-plus rise in the yield of the 10-year Treasury note during that time and the anticipation of an interest rate hike at the Federal Reserve’s policy meeting later this month. The fund’s holding should benefit as interest rate spreads increase.
S&P Capital IQ rates IAT “overweight.” It has a relatively low expense ratio of 0.43% and a yield of 1.84%.
IAT broke from a shallow consolidation in October as it smashed through its 200-day moving average into a bull channel that has developed over the past two months. We saw high buying volume in mid-November as the ETF bounced from its moving average on a pullback, resuming the bull trend.
This is not a trading recommendation unless you plan on using options. Rather, long-term investors should try to buy IAT on a shallow pullback to $36 with a long-term target of $45 for a potential gain of 25% in 12 months.