Here’s How To Buy The Top Stocks In This Leading Sector

Bank stocks are beating Wall Street profit targets and the broader market this year, boosted by a recovering economy and rising Treasury yields.


Though they’ve pulled back slightly the past few days along with bond yields, most are still near buy points. And going into Thursday, banks led the 33 sectors tracked by IBD, with a nearly 42% year-to-date gain.

But keeping track of the vast banking universe isn’t easy. Financial ETFs can help investors gain easy access to hot stocks in banking. SPDR S&P Bank (KBE) and SPDR S&P Regional Banking (KRE) offer two such options.

SPDR S&P Bank, with $3.4 billion in assets, tracks the S&P Banks Select Industry Index. That provides exposure to the bank segment of the S&P Total Market Index. The ETF gives investors access to small-cap, midcap and large-cap bank stocks, with a weighted average market cap of $28.3 billion.

Regional banks accounted for the biggest sector weight at just above 75% of assets. Thrifts & mortgage finance companies were next at about 12% and diversified banks 7%. Asset management and custody banks, and other diversified financial services made up the rest.

Bitcoin Play Leads Bank Stocks

KBE’s top holdings as of Oct. 13 included Silvergate Capital (SI), Western Alliance Bancorp (WAB), KeyCorp (KEY), Signature Bank (SBNY) and SVB Financial Group (SIVB).

La Jolla, Calif.-based Silvergate allows clients to trade Bitcoin and other cryptocurrencies 24/7. The stock, up 119% this year, is building the right side of a long base.

Western Alliance, up nearly 90% this year, remains in buy range from a 109.94 entry of a five-month consolidation. A 98 Composite Rating puts the Phoenix-based holding company second in the 68-stock West/Southwest banks group. That’s just behind Silvergate, which leads with a 99 composite score.

The top 10 holdings added up to about 15% of assets in the 95-stock portfolio. Other holdings include big diversified banks such as Bank of America (BAC), Citigroup (C), JPMorgan (JPM), U.S. Bancorp (USB) and Wells Fargo (WFC).

Big Banks Offer Earnings Surprise

Most of them reported Q3 earnings during the week. On Wednesday, Dow Jones stock JPMorgan beat Wall Street’s profit and revenue targets. Bank of America, Citigroup and Wells Fargo all delivered better-than-expected results on Thursday. Bank of America is slightly extended, JPMorgan is trading near a buy point, and the other two stocks are basing.

KBE is about 1% away from a 55.83 buy point of a five-month consolidation, according to MarketSmith chart analysis.

KRE with $5.2 billion in assets, tracks the S&P Regional Banks Select Industry Index. As such, it aims to provide exposure to the regional banks segment of the S&P Total Market Index.

It holds the same top holdings mentioned above for KBE except for the big diversified banks, and at slightly bigger weights (2% vs. 1.5%). Regional banks make up 100% of the 133-stock portfolio.

The regional bank ETF is about 4% away from topping a seven-month consolidation with a 73 buy point. Both KBE and KRE charge a 0.35% expense ratio.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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