There Is More Value To Be Found In The Finance Sector Than In Any Other Sector

Introduction

I found more value in the Finance Sector than I did in any other sector that I screened. All in all, I identified 131 attractively valued companies out of the 1,888 companies in the Finance Sector.  This is approximately 10 times as many as I found in any other sector. Stated succinctly, there is a lot of value in the Finance Sector but a lot of redundancy as well.

There are 14 subsectors that collectively make up the Finance Sector. Furthermore, there are several research candidates in each subsector that are very similar to each other relative to growth, dividend yields, and valuation. Consequently, for diversification purposes, you might want to only select those specific candidates in each subsector that appeal to you most.  Stated more directly, there are a lot of viable choices for attractive investments in each subsector within the Finance Sector. Therefore, you can pick your favorite, or diversify among several different candidates in each subsector.

For example, the investor can literally take their pick of most regional banks and expect similar long-term results. The same could be said about the major banks. However, the Canadian domiciled major banks have more consistent long-term historical records. This is simply attributed to the fact that they did not participate in the US financial debacle that led to the Great Recession of 2008.

A Sector By Sector Review

This is part 9 of a series where I have conducted a simple screening looking for value over the overall market based on industry classifications and subindustry classifications reported by FactSet Research Systems, Inc. In part 1 found here, I covered the Consumer Services Sector. In part 2 found here, I covered the Communication Sector. In part 3 found here, I covered the Consumer Durables Sector and its many diverse subsectors. In part 4 found here, I covered Consumer Nondurables. In part 5 found here, I covered companies in the Consumer Services Sector. In part 6 found here, I covered the Distribution Services Sector.  In part 7 found here, I covered the Electronic Technology Sector. In part 8 found here, I covered the Energy Minerals Sector.

In this part 9, I will be covering the Finance Sector.

In each article in this series, I will be providing a listing of screened research candidates from each of the following industry sectors, the sector I’m covering in this article is marked in green:

A Simple Valuation and Quality Screening Process

With this series of articles, I will be presenting a screening of companies that have become attractively valued primarily as a result of the bearish market activities experienced in 2018 from each of the above sectors. I will be applying a rather simple valuation and quality-oriented screen across each of the sectors. First, I have screened for investment-grade S&P credit ratings of BBB- or above. Next, I have screened for low valuations based on P/E ratios between 2 and 17. Finally, I have screened for long-term debt to capital no greater than 70%.  (Note: since debt is primarily a banks product or inventory, it is not a relevant metric in this sector.)

By keeping my screen simple, and at the same time rather broad, I will be able to identify attractively valued research candidates that I might have overlooked through a more rigorous screening process. In other words, I’m looking for fresh ideas that I might have previously been overlooking. Furthermore, I want to be clear that I do not consider every candidate that I have discovered as suitable for every investor. However, I do consider them all to be attractively valued. Additionally, I also believe that every investor will be able to find companies to research that meet their own goals, objectives and risk tolerances as this series unfolds.

Finance

Major Banks

Regional Banks

Savings Banks

Finance/Rental/Leasing

Investment Banks/Brokers

Investment Managers

Financial Conglomerates

Property/Casualty Insurance

Multi-Line Insurance

Life/Health Insurance

Specialty Insurance

Insurance Brokers/Services

Real Estate Development

Real Estate Investment Trusts

Portfolio Review:  Finance Sector:  131 Research Candidates

The following portfolio review lists the 131 research candidates that I referenced in the introduction. Obviously, there are too many companies in this sector to review in a single article.  Furthermore, I do want it to be clear that initial screen such as this is not offered as recommendations to buy.

This initial screen is just identifying companies that meet the characteristics that were searched for. However, it would take a lot more research and due diligence before any of these pre-screened research candidates turned into buy recommendations. With that said, there are many highly recognized Financial Sector companies on the list, as well as several that many readers may not be familiar with.

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FAST Graphs Screenshots of 14 Research Candidates One from Each Subsector

The following screenshots provide a quick look at each of the 16 candidates screened out of over 19,000 possibilities. However, there were 1888 companies categorized as Finance Sector, and these 14 were presented as one example from each subsector. The company descriptions are provided courtesy of the Wall Street Journal. In the FAST Graphs analyze out loud video that follows the screenshots, I will provide additional details and thoughts on the possible attractiveness as well as the potential negatives of each of these research candidates.

For brevity’s sake, I have hand selected and presented screenshots of one company from each subsector as follows:

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Disclosure:  Long AFL, AMP

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell ...

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