NEW YORK (TheStreet) -- Financial stocks have been rallying. With banks reporting improving earnings, financial funds have gained 14.7% this year, outdoing the S&P 500 by 4 percentage points, according to Morningstar.Some mutual fund portfolio managers argue that financial stocks can continue climbing. The managers have big stakes in banks, insurance companies and money managers. Funds with sizable financial holdings include Davis New York Venture ( NYVTX), Haverford Quality Growth Stock ( HAVGX) and Snow Capital Opportunity ( SNOAX). The bullish mutual funds are in a distinct minority. Many portfolio managers remain wary of the sector, concerned that profits could be hurt by new regulations in the U.S. and the continuing crisis in Europe. But Nate Snyder, portfolio manager of Snow Capital Opportunity, argues that the fears are excessive. "We have endured the worst financial crisis in 70 years," he says. "The next big crisis is not likely for another 70 years. From here on, everything should improve."
Hoyle concedes that many banks remain shaky. But he says that he can find a handful of names that can prosper in good and bad times. A holding is JPMorgan Chase ( JPM), which came through the financial crisis in relatively solid shape. The government's recent stress test showed that JPMorgan has the financial strength to survive a massive recession. The healthy balance sheet should enable the bank to expand globally, says Hoyle. "They are going to be able to capture market share from the European banks, which have capital problems," he says. 10 Stocks Owned by the Best Fund Managers >> Hoyle also likes BlackRock ( BLK), a money manager that has $3.5 trillion in assets under management. The company's growing iShares unit is the leading provider of ETFs. Hoyle expects BlackRock to increase dividends at a 20% annual rate.