The perennial bullishness of analysts is back again this year, and it (surprisingly) still includes the financial sector. According to a Bloomberg survey, analysts expect profits for the six largest banks (including JP Morgan, Bank of America, and Goldman Sachs) to jump 57% in 2012, despite 2011 being a dismal year for the sector.
This time last year analysts expected financial institutions to see profits rise 32% over 2011, but profits probably fell 18% as financials were the worst performing sector in the U.S. for 2011. Now, analysts are pinning their hopes on "improved trading results, more investment-banking deals, expense-cutting measures and lower credit costs." (via Bloomberg)
Last year, banking profits were pummeled by Europe's sovereign-debt crisis, protests across the world, and natural disasters in Japan. U.S. GDP only expanded an estimated 1.8% last year, when 3.1% growth was expected. According to Paul Miller, analyst at FBR Capital Markets Corp., "The banks need GDP growth to grow loans. We all thought there would be loan growth, and Europe didn't help anybody."
Analysts predict that the 2012 rise in banking earnings will be led by Morgan Stanley and Goldman Sachs, which are most reliant on trading revenue and investment-banking operations according to Bloomberg.
Business section: Investment ideas
Do you agree with analysts that 2012 will see the grand return of the financial sector? If so, here are some ideas to get you started.
We ran a screen on the financial sector for stocks exhibiting the technical "golden cross," in which the stock's 50-day moving average has recently crossed above its 200-day moving average. This indicates recent momentum to the upside that may persist.
We screened these momentum stocks for those seeing the most significant net institutional purchases over the current quarter.
Do you think these companies will see the large earnings growth analysts expect for the industry?
List sorted by net institutional purchases as a percent of share float. (Click here to access free, interactive tools to analyze these ideas.)
1. First Republic Bank (NYSE: FRC ) : Provides private banking, private business banking, investment management, brokerage, trust services, and real estate lending services in California, Nevada, and New York. Market cap of $4.04B. SMA50 at $28.85 vs. SMA200 at $28.80 (current price at $31.26). Net institutional shares purchased over the current quarter at 20.2M, which is 37.57% of the company's 53.77M share float.
2. EastGroup Properties: Focuses on the development, acquisition, and operation of industrial properties in the United States. Market cap of $1.19B. SMA50 at $41.98 vs. SMA200 at $41.16 (current price at $43.83). Net institutional shares purchased over the current quarter at 2.8M, which is 10.87% of the company's 25.76M share float.
3. Avalonbay Communities: Engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. Market cap of $12.12B. SMA50 at $125.73 vs. SMA200 at $124.94 (current price at $127.48). Net institutional shares purchased over the current quarter at 8.0M, which is 8.49% of the company's 94.24M share float.
4. Presidential Life: Engages in the marketing and sale of various fixed annuity, life insurance, and accident and health insurance products in the United States. Market cap of $311.96M. SMA50 at $9.85 vs. SMA200 at $9.80 (current price at $10.55). Net institutional shares purchased over the current quarter at 2.1M, which is 8.43% of the company's 24.91M share float.
5. Glimcher Realty Trust: Operates as a real estate investment trust (REIT) in the United States. Market cap of $976.01M. SMA50 at $8.69 vs. SMA200 at $8.69 (current price at $9.08). Net institutional shares purchased over the current quarter at 7.8M, which is 7.41% of the company's 105.32M share float.
6. Excel Trust: Engages in financing, developing, leasing, owning and managing community and power centers, grocery anchored neighborhood centers and freestanding retail properties. Market cap of $367.11M. SMA50 at $10.99 vs. SMA200 at $10.75 (current price at $12.12). Net institutional shares purchased over the current quarter at 1.8M, which is 6.26% of the company's 28.75M share float.
7. Platinum Underwriters Holdings (NYSE: PTP ) : Provides property and marine, casualty, and finite risk reinsurance products worldwide. Market cap of $1.26B. SMA50 at $33.37 vs. SMA200 at $33.30 (current price at $33.87). Net institutional shares purchased over the current quarter at 2.2M, which is 6.07% of the company's 36.23M share float.
8. Pebblebrook Hotel Trust (NYSE: PEB ) : Operates as a real estate investment trust. Market cap of $983.90M. SMA50 at $18.43 vs. SMA200 at $18.42 (current price at $19.33). Net institutional shares purchased over the current quarter at 2.3M, which is 4.55% of the company's 50.58M share float.
9. Health Care REIT (NYSE: HCN ) : Engages in investment, development, and management of properties. Market cap of $10.29B. SMA50 at $50.81 vs. SMA200 at $49.67 (current price at $53.77). Net institutional shares purchased over the current quarter at 7.9M, which is 4.44% of the company's 178.01M share float.
10. Aspen Insurance Holdings (NYSE: AHL ) : Provides insurance and reinsurance products and services worldwide. Market cap of $1.85B. SMA50 at $25.95 vs. SMA200 at $25.58 (current price at $26.17). Net institutional shares purchased over the current quarter at 2.9M, which is 4.43% of the company's 65.39M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
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