BOSTON (TheStreet) -- Are big financial companies' stocks, many with double-digit gains this year, doing a dead-cat bounce or are they early on the path to steady recovery due to investors' renewed confidence in the beleaguered sector?Maybe both, because financial services was the worst-performing industry last year, losing 18.4%, and banks and insurers had nowhere else to go but up. But also because investors' fears about the European sovereign debt crisis and its potential impact on the already struggling global economy have waned, and they're finding banks, in particular the globe-spanning ones, super cheap. The multi-faceted financial-services sector is up 8.6% this year, second only to the materials industry's 11% gain, while the S&P 500 has a rise of 4.7%. Eric Oja, a bank-industry analyst at S&P Capital IQ, said in an interview that he thinks the financials run this year "is a short-term rebound" coming off a bottom in October when investors feared an economic disaster as the European crisis was showing no progress. As a result, the sector's shares got pounded and the "worst-case scenario" got priced in. "Since then, there seems to be more clarity about what's going on in Europe," which has proved reassuring to investors, he said. In addition to that, fourth-quarter financial-industry results, although not great, were also a bit of a confidence builder for investors as most banks showed decent results and improvement in key capital ratios that indicate stability. Oja said he expects financial sector stocks may remain range bound over the near term given their big bounce recently. Indeed, Monday was a tough day for banks stocks, as the KBW Bank Index ( I:BKX) was down over 1%, with 21 out of 24 index components showing declines for the session. That pared this year's big gains. Some of the largest share-price gainers this year were among the biggest losers last year. The best example of that is Bank of America ( BAC). Its shares are up 31% this year after losing 58% in 2011. Oja said that Bank of America was trading "at half of book value" late last year, "and that's a fire-sale price," so the company's fourth-quarter results may have many believing that the worst is behind it. Perhaps also giving investors more confidence were last week's comments from the Federal Reserve, which indicated, in essence, that it will remain active in trying to help the economy by letting businesses and consumers know they can continue to borrow cheaply over the next few years. The Fed said that it will probably keep interest rates low for the next three years and also provided an inflation target for the first time, and updated its economic projections. Here, then, are 10 financial stocks that have among the biggest turnarounds in share prices this year:
Barclays ( BCS) Company profile: Barclays, based in the U.K., is one of the largest banks in the world, and in addition to its retail and business customer operations in Europe, Africa and Asia, runs a a debt-focused investment bank, and it owns Barclaycard, a large credit card issuer. Investor takeaway: Down 32% last year, its shares are up 28% this year. S&P's survey of analysts found that two have it rated "buy," one has it rated "buy/hold," and two have it rated "hold." Morningstar analysts are extremely cautious, noting that: "For now, Barclays sports a healthy core Tier 1 ratio of 11% as of Sept. 30. Proposed changes in U.K. and global regulations may leave Barclays short of capital, and we now see a 50% chance that the bank will need to raise capital to meet higher expectations."
Morgan Stanley ( MS) Company profile: Morgan Stanley is a global investment bank with institutional securities, wealth management and asset management segments. Investor takeaway: The company's shares are up 23% this year after losing 44% in 2011. S&P has a $21 price target on its shares, a 14% premium. S&P found 10 "buy" ratings, three "buy/holds," 13 "holds," and two "weak/holds," in a survey of analysts.
Prudential Financial ( PRU) Company profile: Prudential is one of the nation's largest life insurers. It also sells asset-management products to individuals and institutions. It has a large international insurance division that operates in more than 30 countries, and is growing that fastest in Asia. Investor takeaway: Down 12% last year, Prudential's shares have gained 14% this year. S&P downgraded its rating in November to "hold" from "strong buy," but its analyst said that "longer term, we view positively (Prudential's) mix of business and its superior financial flexibility." S&P's survey of analysts' ratings found nine "buys," seven "buy/holds," and four "holds."
MetLife ( MET) Company profile: MetLife is America's largest life insurer and also supplies ancillary financial-services products. Investor takeaway: Down 28% last year, MetLife's shares are up 14% in 2012. Two weeks ago, S&P reiterated its "buy" rating and raised its 12-month target price on the shares by $7 to $42, a 17% premium. S&P's survey of analysts' rating found eight "buys," eight "buy/holds," and four "holds."
JPMorgan Chase ( JPM) Company profile: JPMorgan Chase is one of the largest financial institutions in the U.S., with more than $2 trillion in assets and operations in more than 60 countries. Investor takeaway: JPMorgan Chase fell 20% last year, and its shares are up 13% this year. S&P said the firm's fourth-quarter results "were adversely affected by trading revenues of only $750 million, down sharply from an average of $2.8 billion in the prior four quarters, due to risk aversion on the part of corporate customers." But analysts' consensus is for earnings of $4.70 per share this year, with growth of 14% in 2013. A survey of analysts by S&P found 18 "buys," nine "buy/holds," and five "holds."