In what was a solid week for financial company earnings (Citigroup, JP Morgan, Wells Fargo, Goldman Sachs), it may make sense for mutual fund investors to consider allocating a portion of investor capital in what is appearing to be a stable and consistent sector in financial sector-focused mutual funds.
Davis Financial (RPFGX), run again by long-time fund manager Chris Davis, is up over 6% YTD and an outstanding 75% over the last 5 years (15% plus annualized returns), and is betting big that credit card plays American Express (AXP) and Visa (V) will soon begin to outperform as they have in recent years. Wells Fargo (WFC) is also a large position in the fund. Those shares continue to be robust in light of a stable mortgage market (thanks to the Fed’s continued low interest policy) and a real estate market that has rebounded nicely from the late 2008/early 2009 credit crisis. As for Bank of New York Mellon (BK) shares, the fund may get a boost on news that activist investor Nelson Peltz has built up a stake of nearly 2.5 percent in the stock.
Here’s a look at some of the top overall holdings in the fund:
The Bottom Line
While a rise in interest rates can often hurt the markets, financials can sometimes get a boost. A rate rise could signal an improving economy and create better demand for banking products such as consumer loans, credit lines, and mergers-and-acquisitions advice.
From where things stand now, Davis Financial could be a great way for mutual investors looking for exposure to a better investing environment in financially-focused companies.