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What are we looking for?

U.S.-listed financial stocks trending higher.

The Financial Select Sector SPDR Fund (XLF) has started the year with a gain of more than 6 per cent, making it the second-best performing sector of 2022 so far, second only to energy. The S&P 500 remains negative in the same period, down almost 1 per cent year-to-date, as inflation concerns put pressure on U.S. growth stocks, to the benefit of value stocks and financials, both of which tend to outperform in an inflationary environment.

While we don’t know to what extent the U.S. Federal Reserve will respond in the form of rate hikes, what matters to us the most is price action. This week we look for stocks in the U.S. financial sector that are making new 52-week highs, which helps us identify price uptrends in play.

The screen

We will be using Trading Central Strategy Builder to search for U.S.-listed financial companies with upside price performance and better-than-average price-to-earnings ratios.

We begin by setting a minimum market capitalization threshold of US$15-billion to focus on larger, more established companies in the financial sector.

To ensure we don’t overpay for our investments we will screen for companies with reasonable valuations based on a P/E ratio of 13.8 (average P/E of the S&P 500 Financials sector) or less.

In order to screen for financial stocks that are indicating uptrend characteristics, we filtered for stocks that are up at least 10 per cent over the past four weeks, within five days of a new 52-week high and no more than 5 per cent below their most recent 52-week high. (Note: A stock with zero days from its most recent 52-week high, yet showing a decline from the 52-week high, indicates a slight price pullback since Wednesday’s close.)

We have also included dividend yield, year to date, and one-year percentage return for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options, and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

U.S.-listed financial stocks

RankCompanyTickerMkt. Cap. (US$ Bil.) P/E4W Perf. (%)Days since 52W HighChg. from 52W High (%)Div. Yld. (%)YTD Perf.1Y Perf.Recent Price (US$)
1CIBCCM-N57.811.615.4003.99.944.0130.69
2Regions FinancialRF-N23.69.313.32-2.92.79.336.525.18
3Citizens FinancialCFG-N23.511.117.10-0.62.812.437.255.67
4MetLife Inc.MET-N56.911.211.20-1.42.86.934.468.18
5KeyCorpKEY-N24.610.414.22-1.32.912.040.526.64
6Aflac Inc.AFL-N41.910.210.40-0.92.58.737.463.96
7Royal Bank of CdaRY-N164.213.214.3003.28.335.7116.78
8Fifth Third BancorpFITB-Q33.613.613.30-1.22.410.155.249.74
9UBS Group AGUBS-N66.79.211.30-0.21.98.029.519.66
10M&T Bank Corp.MTB-N23.112.919.20-0.52.713.422.4183.36
11Wells Fargo & Co.WFC-N224.913.415.20-0.51.411.266.956.41

Source: Trading Central

Our screener ranks the list based on all performance and revenue criteria.

Topping our list is Canadian Imperial Bank of Commerce, which trades on both the TSX and NYSE. At the time of writing, CIBC has made a new record high. The stock is up 9.9 per cent year-to-date. Despite the record-high stock price, the stock’s P/E sits at just 11.6. CIBC shares have been trending higher since breaking above key resistance at the US$123 price level set back on Nov. 4.

Royal Bank of Canada is another Canadian bank with a dual listing that made our screen. RBC has the second-highest market cap on our list at US$164.2-billion. Looking at the recent price action from a technical perspective, RBC shares broke above a classic “broadening wedge” continuation pattern after breaking above their prior record high, set back in October at the US$108 level. RBC and CIBC are the only banks on our list that are making new record-highs at the time of this writing.

San Francisco-based Wells Fargo & Co. has the largest market cap on our list at almost US$225-billion. Its stock has the best one-year performance on our list at 66.9 per cent but is still 14 per cent below its record high set back in February of 2018.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

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