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The 5 Strongest Names in the Financial Sector


Plus, updates on Bank of America, JPMorgan, Citigroup, and Morgan Stanley.

Readers who follow our firm's work will recall that we have been bullish on the financials since August 23, 2012, which is when we got Buy ratings on Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM). We wanted to update readers about some widely followed financials at this time.

First up is Bank of America. For readers who are not familiar with our ratings system, the best risk/reward scenario is to get long a Strong Buy (5) rating from a Buy (4) rating and reduce 50% at approaching overbought and 100% at overbought. Additionally, we recommend scaling out of longs with a downgrade to a Hold (3) rating, and being out of a name completely with Sell (2) or Strong Sell (1) ratings. Yesterday we got a downgrade from a Strong Buy to a Buy. This move is not very alarming, as we saw a similar pattern on November 16. At this juncture, we sold 75% of Bank of America, and we will now wait for a Strong Buy to scale back into this name. The stock is no longer extended, and it is neutral on the countertrend reading.

Next up are Citigroup (NYSE:C), JPMorgan, and Morgan Stanley (NYSE:MS). Currently, we have Citibank as a Strong Buy; it was approaching overbought on February 14. Citigroup has a very similar pattern and high correlation to Bank of America and JPMorgan. Because of the high correlation of the large cap financials, there is no reason to own more than one of these names. At this juncture, we will not be adding to this name. Both JPM and MS are rated Strong Buys; both are slightly extended, even after the slight pullback.

For those who are looking for some diversification within financials, the five names in the chart below -- Apartment Investment and Management (NYSE:AIV), XL Group (NYSE:XL), Allstate (NYSE:ALL), Health Care REIT (NYSE:HCN), and Ameriprise (NYSE:AMP) -- are the strongest within the financial sector.

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Editor's Note: Today at 4:30 p.m. ET, Minyanville is hosting a free webinar with Buzz & Banter contributor Peter Prudden, who will give attendees an in-depth look at his macroeconomic outlook and trading style. To sign up for this free event, click here and hit the register button on the upper-left side of the screen.

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No positions in stocks mentioned.
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