Sector of the Week: Financials

Next on the best-performer list is the (FNPIX Quote)ProFunds Financials UltraSector, which attempts to track 150% of the return of the Dow Jones U.S. Financial Sector Index.

Its largest holdings include financial giants such as Citigroup(C Quote), Bank of America(BAC Quote), American International Group (AIG Quote) and JPMorgan Chase (JPM Quote), and the median market cap of all holdings is $37.7 billion.

Diversified financial services account for 34.1% of assets, while banks make up 29.4%, insurance 21.6%, REITs 9.7%, savings and loans 3.3% and commercial services 0.78%.

The stocks that contributed the most to the fund's overall performance for the period include Jones Lang Lasalle(JLL Quote), which climbed 11.75% on a 21% increase in fourth-quarter profits and talk of new growth through acquisitions, and Unumprovident(UNM Quote), which was lifted 9.71% after reporting a 66% increase in fourth-quarter pretax earnings.

The one financial fund bucking the trend is the First Financial Fund(FF Quote), which fell by 0.54%. The closed-end fund's largest holdings include First Republic Bank/San Francisco(FRC Quote), UBS AG(UBS Quote) and BankUnited Financial(BKUNA Quote).

In aggregate, 48.5% of the fund's holdings are banks, 24.4% are savings and loans, 10.3% are insurance companies, 9.0% are in diversified financial services, 3.1% are REITS and 1.6% are in telecommunications. The value of its holdings actually rose during the week, notably First Republic Bank/San Francisco, which announced Monday that it's being acquired by Merrill Lynch (MER Quote).

As a result, First Financial Fund's discount to its net asset value widened. The fund's shares are now trading at a 4% discount to assets, compared with an average premium to NAV over the past year. Unlike open-end funds, which continuously issue and redeem shares, closed-end fund issue a fixed-number of shares that trade throughout the day like stocks. So their share prices can move independently of the value of their holdings. But at this level, First Financial looks a lot more attractive, since investors can pick up its holdings on the cheap.

Ironically, the First Financial Fund was the best-performing fund the last time I reviewed financial stocks for this weekly column, back on Oct. 13, 2006.

A Rising Tide Lifts Most Boats Worst-performing financial funds for the week ended Feb. 1.
Fund	Ticker	Rating	Fund Type	1 Week Total Return
First Financial Fund Inc	FF	D-	Closed-End	-0.54%
John Han Bk & Thrift Opp Fd	BTO	C	Closed-End	0.30%
Diamond Hill Financial L/S-A	BANCX	C+	Open-End	0.72%
AXA Enterprise Glbl Fin Se-B	EGFBX	A	Open-End	0.75%
iShares S&P Glbl Finl Sector	IXG	B	ETF	1.02%
Fidelity Select Insurance Pt	FSPCX	C+	Open-End	1.09%
Legg Mason Part Fincl Srv-C	SFSLX	C	Open-End	1.14%
Saratoga Adv Trust Fin/S P-A	SFPAX	C-	Open-End	1.15%
RBB Senbanc Fund	SENBX	D-	Open-End	1.21%
Wells Fargo Adv Spec Fin-A	SIFEX	C	Open-End	1.22%
Source: Bloomberg