NEW YORK (TheStreet) --Financial stocks have outperformed the broader market in 2012, but are "at risk" in 2013, according to a report from Bank of America Merrill Lynch.
"We expect financials to trade sideways for the coming few years," states the report from technical analyst Mary Ann Bartels. "The tactical rally and leadership trend for financials that began in late 2011 is coming under pressure in late 2012. Key support for the S&P 500 Financials Index is 200. Relative to the S&P 500, Financials have improved but a breakout above near-term relative range highs is required to put in a year-long relative price base."
An email message to Bartels seeking further explanation of her view wasn't returned.
The Financial Sector Select SPDR (XLF) was up 22.96% year to date shortly after Monday's open, versus 13.46% for the S&P 500. Bank of America (BAC), regularly among the most heavily traded U.S. stocks, has been a particular standout, climbing more than 90% on the year.The report, which recommends investors focus on healthcare, consumer staples telecom utilities and stocks with high dividend yields, also urges investors to look at "mega-cap" stocks that are underweighted by institutional investors versus their benchmark weighting in the S&P 500. It identifies 29 stocks fitting that description, of which just two--Citigroup (C) and U.S. Bancorp (USB)--are financials. The list also includes General Electric (GE)--classified as an industrial company despite its sizable financial presence. -- Written by Dan Freed in New York. Follow @dan_freed
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV