Markets

5 Finance Mutual Funds for 2015 - Mutual Fund Commentary

After a difficult Q4 14, and a not so fruitful Q3 14, the Finance sector is expected to show strong signs of growth in Q1 15; currently the finance sector is expected to see earnings grow at +13.2%. Further, this earnings growth is expected to ramp up in Q3 15 and continue through the end of 2015. Q3 15 earnings growth is currently estimated at 10.7% growth, with Q4 15 at 17.2%.

This uptick in expected earnings in the latter half of 2015 is due to the fact many believe that the FED will raise interest rates in either June, or September. The rate increase will expand margins for brokerage firms, insurance companies, banks, and money managers. Further, the increased interest rates would enable banks to earn more on the spread between interest rates for savings accounts and certificates of deposit. Moreover, increasing rates means that the FED believes that the overall economy is doing better, and that in-turn would mean more people buying cars and houses; which of course need to be insured. Therefore, the insurance industry would receive a boost in underwriting, as the financial companies see more loan activity.

Given this positive data for the second half of the year, we have picked 5 top performing Financial Sector Mutual Funds with low expense ratios (to better understand expense ratios, please click here ), and low load funds (to better understand load funds, please click here ), which are best positioned to benefit from the second half surge. Further, these funds have a low minimal initial investment, and all carry either a Zacks Rank #1 (Strong Buy), or Zacks Rank #2 (Buy).

Financial Mutual Funds For 2015

Fidelity Select Insurance Portfolio ( FSPCX ) a Zacks Rank #1 (Strong Buy) seeks capital appreciation, and normally invests at least 80% of assets and in no event less than 25% in securities of companies principally engage in underwriting, reinsuring, selling, distributing, and placing insurance. The fund offers dividends and capital gains twice a year.

This fund is primarily allocated with Large Cap Value companies (just over 80% of the portfolio), and the fund is weighted 95% Finance, 3.2% Other, and a half a percent in Health. The fund, as of the last filing, holds companies like MetLife, ACE Ltd, Chubb Corp, Aflac, American International, and Travelers.

The Fidelity Select Insurance Portfolio requires a minimum initial investment of $2,500, and has a very low expense ratio of 0.82. Further it has zero load fees, and no 12b-1 fees. It does have a small redemption fee of 0.75%, but that is very low for the industry.

Past Performance, Total Return: 1 year 11.31%, 3 year 19.52%, and 5 year 13.48%. The performance is in the top 10 Percentile Rank (amongst peers) for each year listed.

Emerald Banking and Finance Fund ( HSSAX ) a Zacks Rank #1 (Strong Buy) seeks long-term growth through capital appreciation. Income is a secondary objective. The fund generally invests at least 80% of its net assets in common stocks. The fund managers limit the fund investment to 50 companies and the fund invests primarily in U.S. based companies.

The fund is primarily allocated with Small Cap Value companies (just over 75% of the portfolio), and the fund is weighted 79% Finance, 15% Other, and 2% Retail Trade. HSSAX, as of the last filing, holds companies like California Republic Banco, Bank of Ozarks, Signature Bank, Eagle Bancorp, and Customers Bancorp.

The Emerald Banking and Finance Fund requires a minimum initial investment of $2,000, and has a slightly elevated expense ratio of 1.59. This fund does carry a Max Sales Load of 4.75%, but has zero redemption fees.

Past Performance, Total Return: 1 year 4.37%, 3 year 20.00%, 5 year 14.27%. The three and five year performance is in the Top 5 Percentile Rank (amongst peers). With the banks showing significant improvement in Q1 15, the short term performance should pick up to their 3 and 5 year total return levels.

Fidelity Select Banking Portfolio ( FSRBX ) a Zacks Rank #1 (Strong Buy) normally invests at least 80% of assets in common stocks of companies principally engaged in accepting deposits and making commercial and principally non-mortgage consumer loans. The fund offers dividends and capital gains in the month of April and December.

The fund allocation is broken up in two major parts, 50% Large Cap Value, and 30% Small Cap Value. Further, the FSRBX portfolio is weighted 90% Finance, 7% Other, and 2% Technology. The Fidelity Select Banking Portfolio, as of the last filing, holds companies like Wells Fargo, Bank of America, JPMorgan Chase, SunTrust, and Capital One Financial.

The Fidelity Select Banking Portfolio requires a minimum initial investment of $2,500, and carries no load fees. It does carry a small Redemption fee of 0.75%, but overall it has a low expense ratio of 0.80.

Past Performance, Total Return: 1 year 1.31%, 3 year 14.70%, 5 year 9.65%.

Schwab Financial Services Fund ( SWFFX ) a Zacks Rank #2 (Buy) seeks long-term capital growth. The fund primarily invests at least 80% of its assets in securities issued by companies in the financial services sector. The fund may invest in common stocks and other equity securities of foreign companies. The fund offers dividends and capital gains annually.

The fund is allocated in two major areas, 70% Large Cap Value, and 20% Small Cap Value. Moreover, the fund portfolio is weighted heavy in finance, 90%, while 6% is in Other 6%, and 2% is allocated to Non-Durable Goods. Further, SWFFX, as of the last filing, holds companies like Wells Fargo, Berkshire Hathaway, JPMorgan Chase, Bank of America, and Morgan Stanley.

The Schwab Financial Services Fund requires a minimum initial investment of $100, and carries no load fees. Further, it does have a 2% Redemption fee, but overall it has a low expense ratio of 0.90.

Past Performance, Total Return: 1 year 10.20%, 3 year 16.09%, 5 year 10.50%. The 1 year and the 5 year Total Returns were in the upper third percentile rank (amongst peers).

Fidelity Select Consumer Finance Fund ( FSVLX ) a Zacks Rank #2 (Buy) seeks capital appreciation. The fund normally invests at least 80% of assets in common stocks of companies principally engaged in investing in real estate, usually through mortgages, and other consumer related loans. The fund offers dividends and capital gains twice a year in April and December.

The majority of the fund's allocations are in Large Cap Value stocks, 57%, and Large Cap Growth companies, 17%. The fund is weighted heavily in Finance (73%), Technology (21%), and Other (2%). As of the last quarterly filing, the FSVLX fund held companies like, Visa, Capital One, MasterCard, and Navient Corp.

The fund requires a minimum initial investment of $2,500, and carries no Load fees. It does carry a small Redemption fee of 0.75%, but overall it has a low expense ratio of 0.88.

Past Performance, Total Return: 1 year 8.34%, 3 year 16.72%, 5 year 12.18%. In all three time periods, the fund was in the top third percentile rank (amongst peers).

Bottom Line

With the finance sector expecting double digit earnings growth in the second half of 2015, it would be advantageous to look into mutual funds that have high levels of financial exposure. The increased interest rate environment will enable banks, brokerage houses, insurance companies, and money managers to have better margins, and better top and bottom lines.

Note : Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Get Your Free (FSPCX): Fund Analysis Report

Get Your Free (HSSAX): Fund Analysis Report

Get Your Free (FSRBX): Fund Analysis Report

Get Your Free (SWFFX): Fund Analysis Report

Get Your Free (FSVLX): Fund Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

HSSAX FSPCX FSVLX FSRBX

Other Topics

Mutual Funds

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More