TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.
Financial-services funds rallied this week as banks including
(C - Get Report)
(GS - Get Report)
reported better-than-expected quarterly results, helping company shares rebound from declines of as much as 90%.
The stalling of so-called cram-down legislation in the U.S. Senate may help banks extend gains. The law would enable bankruptcy judges to rewrite all aspects of a troubled loan. Without sufficient votes, the cram-down may be watered down to cover fewer loans or given an early sunset date if a compromise can be reached at all.
For the five trading days through Thursday, the average financial-sector fund we track gained 2.5%, excluding inverse funds that sell short banks, real estate investment trusts, insurance companies and brokerage firms. It was the best-performing industry group.
Citigroup, up 32% in the five days, recorded a first-quarter profit of $1.6 billion. Ironically, the same mark-to-market accounting philosophy forcing banks to take losses on securities held required Citigroup to book $2.5 billion in unrealized gains on the drop in market value of its own outstanding debt. Goldman Sachs had better-than- expected earnings as a surge in trading revenue outweighed asset writedowns.
The best-performing financial fund this week is the
First Trust Financial AlphaDEX Fund
, gaining 8.6%. On top of Citigroup, other holdings include
(ETFC - Get Report)
, up 69%;
, up 54%; and
, up 19%.
Bank of America
(BAC - Get Report)
added 8.3% for the week. Bank of America is expected by analysts to report stronger lending from its Countrywide Financial unit when it reports first-quarter earnings on April 20.
The only top-performing financial fund listed below rated as a "buy" is the
Jennison Financial Services Fund
, benefiting from an international mix of financial institutions. Top-name holdings include
(UBS - Get Report)
, up 13%;
, up 9.5%;
, up 6.2%; and
, up 4.8%.