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Overview  Consists of many industries  Diversified Financial Services  Insurance  Commercial Banks  Capital Markets  Real Estate Investments  Etc.

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Presentation on theme: "Overview  Consists of many industries  Diversified Financial Services  Insurance  Commercial Banks  Capital Markets  Real Estate Investments  Etc."— Presentation transcript:

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2 Overview  Consists of many industries  Diversified Financial Services  Insurance  Commercial Banks  Capital Markets  Real Estate Investments  Etc.

3 Overview  XLF Price: $17.15 (1/18/13)  52 week high/low: $17.15/$13.30  Beta: 1.52  Great sector for investors tolerant to risk  Makes up 15.65% of S&P 500

4 Performance XLF 08/21/12-1/18/13 TickerCurrentBeg.% Cap# SharesCurrentvs. S&P 500 Price Gain Value S&P 500 $INX % Sector ETF XLF $17.15$ %15,200$260, %

5 1-Year Chart1-Year Chart

6 3 Month Chart3 Month Chart

7 YTD ChartYTD Chart

8 Largest HoldingsLargest Holdings  JP Morgan Chase & Co (JPM): 8.50%  Berkshire Hathaway (BRK.B): 8.35%  Wells Fargo & Co (WFC): 8.23%  Citigroup Inc. (C): 5.88%  Bank of America Corp (BAC): 5.78%

9 3-Month Movers3-Month Movers  Genworth Financial Inc. (GNW): 31.52%  Bank of America Corp (BAC): 21.57%  Assurant Inc. (AIZ): %

10 Macroeconomic FactorsMacroeconomic Factors  Fiscal Cliff  Automatic Spending Cuts  Debt Ceiling  Earnings Reports

11 Fiscal CliffFiscal Cliff  Increased taxes on individuals making $400k per year or couples making $450k per year  Pay roll tax cut expires  Capital Gains and dividends will rise to 20% for those above 450k/400k  Banks benefit from extension of Mortgage Forgiveness Debt Relief Act

12 YTD XLF PerformanceYTD XLF Performance

13 Spending CutsSpending Cuts  Spending cuts  Automatic $85 billion in cuts  About 7.3% across the board cuts to the Pentagon and 5.1% cut to domestic agency budgets  Pushed back until March 1st  Expect to see more uncertainty as deadline approaches

14 Debt CeilingDebt Ceiling  Could reach ceiling by mid-February  Self-imposed $16.4 trillion debt limit  Could default on debt for the first time in our nations history  January 23 rd Congress agreed to suspend the $16.4 trillion cap on federal borrowing until May 19 th  No Budget, No Pay

15 Earnings  Big Wall-Street banks like MS, GS, and JPM all beat estimates  Cited increased revenue from their institutional securities business  Commercial banks didn’t perform as well  Capital One, Citigroup missed  Citing drop in the Net Interest Margin

16 Key DriversKey Drivers  Economy  Hasn’t been enough economic growth to reduce unemployment rate  GDP expected to rise from 2.5% to 3%  Federal Funds Rate  30 year security: 3.05%  Government is trying to keep the rate low for investors  Borrower’s ability to repay lenders  More likely to borrow if there is a low interest rate

17 Valuation MatricesValuation Matrices  Price to Book (P/B)  This ratio works well with companies that have a lot of hard/liquid assets, such as loans  =  Good for valuing companies in finance, investments, insurance, and banking firms

18 Past RecommendationsPast Recommendations  JPMorgan Chase Oct. 11  Prudential Oct. 16  Blackrock Oct. 18  Keycorp Oct. 23  American Express Oct. 25  Capital One Oct. 30  Morgan Stanley Nov.6  MetLife Nov. 8  US Bancorp Nov. 13  Simon Property Nov. 15  Northern Trust Dec. 4

19 MetLife (MET)MetLife (MET)

20  No Buy  Then: $34.70  Now: $37.35  Settled deposit deal with GE

21 Capital One (COF)Capital One (COF)

22 Capital One (COF)*Capital One (COF)*  Buy  Then: $59.76  Now: $56.24  S&P financial ratings unaffected after underachieving Q4 earnings.  Shares fall 9% because COF is not benefiting from acquisitions as anticipated.

23 Northern Trust (NTRS)Northern Trust (NTRS)

24  No Buy  Then: $48.06  Now: $50.57  Revenue and profits missed Q4 expectations due to FOREX trading income declining 40%.  Reduced currency market volatility.

25 Key Corp (KEY)Key Corp (KEY)

26  No Buy  Then: $8.60  Now: $9.30  Trading at a discount to its book value so the stock may be undervalued.  Could receive approval to increase dividend payments  Loan growth of 5%  Stronger balance sheet since crisis

27 Simon Property Group (SPG)

28  No Buy  Then: $  Now: $  Simon not to buy smaller rival GGP  Plans to pay a portion of debt from acquisitions with proceeds from 2018 notes.

29 JPMorgan Chase (JPM)JPMorgan Chase (JPM)

30  Quarter ending Dec-12 :  sales miss estimate (-0.16%)  Earnings beat estimate (19.79%)  Plan to start an electronic bond-trading service

31 Prudential (PRU)Prudential (PRU)

32  Appoint new Chief Operating Officer for Prudential Group Insurance  Expand in Latin America

33 BlackRock (BLK)BlackRock (BLK)

34  Quarter ending Dec-12 :  sales beat estimate (1.86%)  Earnings beat estimate (6.19%)  Expand in China and Europe  Bought at $ – Sold at $205.82

35 American Express (AXP)American Express (AXP)

36  Quarter ending Dec-12:  Sales in line with estimate (0%)  Earnings in line with estimate (0.29%)  Net profit fell 47% due to reorganization cost

37 Morgan Stanley (MS)Morgan Stanley (MS)

38  Quarter ending Dec-12 :  sales beat estimate (6.53%)  Earnings beat estimate (68.29%)  $1.7 billion reserve for a settlement with bond insurer MBIA

39 U.S. Bancorp (USB)U.S. Bancorp (USB)

40  Quarter ending Dec-12 :  sales in line with estimate (-0.87%)  Earnings in line with estimate (0.6%)

41 Sentiment  Overall, we are bullish about the financial sector  Upcoming fiscal debates will impact performance  Morningstar Direct: 2 Stars

42 References  Reuters  Morningstar Direct  Yahoo Finance  Y-Charts  html;_ylt=Aha35Goe7qSXFvJGSj.CUQT.uYdG;_ylu=X3oDMTNqZGgyMDVwBG1pdAMEcGtnAzA2YjB kYmY4LTZmZTQtMzhkYi04NTViLTY0MmVkMzdiYmJmYwRwb3MDNzkEc2VjA01lZGlhVG9wU3RvcnlUZW1w BHZlcgM3NmUwM2NhMC02MWI4LTExZTItOTVjYi0yMjllZTJiMjIwMGQ-;_ylv=3    html;_ylt=AhICCC7lP7vOqTcJ4S14nD2iuYdG;_ylu=X3oDMTRwMGt2NzNhBG1pdANGaW5hbmNlIEZ QIFRvcCBTdG9yaWVzIG1peGVkIGxpc3QEcGtnAzhlNjA2MTI0LTBiMTAtM2MzZS1iNTBhLWU4ZDE5YmQ1YT k1MgRwb3MDMgRzZWMDTWVkaWFCTGlzdE1peGVkTFBDQVRlbXAEdmVyAzEzMThmZDg4LTY1YjktMTFl Mi05ZTlhLTAzMjg3Y2I3MGE1YQ-- ;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3 Rpb25z;_ylv=3


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