Financial stocks, represented by the XLF (Financial Select Sector), have vastly underperformed the larger market in 2020. However, there have been some exceptions to the rule, delivering exceptional performance against prevailing trends.
According to the research data analyzed and published by ComprarAcciones.com, the XLF tumbled by -21.15% YTD in September 2020. In the trailing one-year period up to this date, it shed a total of -13.99%.
One of the fastest growing financial stocks is PNC Financial Services Group. It is a diversified company in the finance sector offering asset management and banking services. During Q2 2020, the company reported a year-on-year (YoY) net income increase of 166%. Its earnings per share (EPS) growth for the quarter was 191.7%. The US regional bank attributed the gains to a sale of its position in BlackRock Inc. It previously held a 22.4% equity investment in the asset management firm. Following the sale, it had net proceeds of $14.2 billion.
Consequently, the net income for common shareholders shot up to a total of $3.59 billion, equivalent to $8.40 per share. That was a significant increase from the previous year’s $1.31 billion or $2.88 per share.
Another fast-growing financial stock was Ares Management Corp. The management investment company offers asset management services as well as a range of advisory services. During Q2 2020, key funds under its management closed commitments worth $1.7 billion.
On a year-to-date (YTD) basis, total commitments closed were worth $4.4 billion. The firm’s EPS growth was a massive 400% in Q2 2020 according to Investopedia.
The fastest growing financial stock during Q2 2020 was White Mountains with an EPS growth of 476.7%. Serving customers in the US and Bermuda, the company provides casualty and property insurance as well as reinsurance.
According to CSI Market, its YoY net income growth rate during the same period was a massive 576.73%. Revenue, on the other, hand grew by 101.24% YoY.
Financial Sector Gains 12% in Q2 2020, Underperforming S&P 500’s 20%
Interestingly, the second quarter of 2020 was the S&P 500’s best Q2 since the index’s inception in 1957. For the period that ran from April through June, the index surged by 20.5%, a remarkable rebound from Q1 2020. It was also the index’s best quarter overall since 1998. During the same period, Nasdaq shot up by more than 30% while the Dow spiked over 17.5%.
Each of the 11 sectors on the S&P 500 reported positive performance during the period. Consumer discretionary was in the lead with a quarterly gain of 32.9%. IT came in second with a growth of 30.5%. However, financials were the third worst sector with a growth of 12.2%. At the time, the sector had the second worst YTD drop of -23.6% ahead of energy (-35.3%).
During the first 150 days of the COVID-19 pandemic, between March 10 and August 7, 2020, the financial sector was the third worst performer on the S&P 500. It had gained 3.2% during that period while the leading sector, IT, had gained 30.2%. utilities was the worst performer, tumbling by 3.3%.
From the beginning of the year to August 7, financials had tumbled by 19.4% according to data from FactSet to become the second worst performer. The worst performing sector was energy, which had shed -38.5%. Information technology was in the lead, having gained 24.1%.
Financials were the fourth worst performers as of September 21, 2020. While the sector was up by 34.26% at the time, materials were up 63.41% and consumer discretionary was up almost 60%. The tech sector was up over 57% as of the same date according to Dow Jones Market Data.
KBE ETF Sheds 40% as IT Leads S&P 500 with 28.7% Share
Part of the reason why the financial sector has been lagging behind is the underperformance of banks during the pandemic period. The KBE ETF has shed over 40% as of September 2020 amid the broader financials dip.
As of September 2020, IT holds the largest share of the S&P 500 at 28.7% and has a YTD total return of 23.93% according to Schwab.com. Health care is second with 14% and a 3% return YTD while consumer discretionary is fourth with an 11.4% share and a 22.02% YTD return.
In fifth place is communication services with a share of 11.1% and a 10.92% return YTD. Financials is in fifth place with a 9.6% market share and a -18.70% return YTD. Energy is the worst performing sector, holding a 2.3% share and a return on -42.87% YTD.