As the market bulls continue to look to rising interest rates as a sign of future strength for Citi, they ignore the fundamentals of the market and of Citi’s weak profit history.
My ratings on ETFs are unique because they are based on my stock ratings for each of a fund’s holdings.
Ergo, the “Most Dangerous” ETFs allocate the most capital to stocks on March’s Most Dangerous Stocks list, which is available for non-subscribers as of today. There are 40 stocks on the Most Dangerous list every month.
Year to date, Bank Of America (BAC) stock is up nearly 45% compared to the S&P at +about 8%. BAC stock has bounced back nicely after dropping precipitously at the end of last year.
I would call the 45% bounce a “dead cat” bounce because I expect the stock to fall right back to $5/share, where it bottomed last Thanksgiving, or lower.
There are 25 financial sector ETFs. Per Figure 1, these 25 ETFs have drastically different stock holdings and, therefore, allocations. The lowest number of holdings is 24 while the highest is 496.
For starters, investors interested in the financial sector cannot expect many good investment options given that the sector gets my “dangerous” rating and ranks ninth out of the ten sectors that make up the economy. Details are in our sector roadmap report.
The financial sector is one of four sectors to earn our “dangerous” rating and is the worst-ranked sector in the our 3Q11 Sector Roadmap report according to my methodology at New Constructs.
Investors in Financial Sector ETFs needs to be very careful about which ETF they buy because there are simply not that many good stocks as compared to bad stocks in the sector. The Financial sector is one of 5 that gets our Neutral rating.
Kyle Guske II, Senior Investment Analyst, MBA
David Trainer, Founder & CEO
