It's been a tough year for firms in the financial sector. Shaky markets have hurt many asset managers and hedge funds. Large banks have been front and center in the eurozone debt debacle and the ongoing battle against toxic assets from the financial crisis.
Much of the downside has yet to be discovered, much less realized. The big concerns weighing on everyone's mind are the possibly dissipating fortitude of banks, especially if the Greek situation turns calamitous. Investors are also worried that new stringent regulations designed to prevent another 2008-style meltdown will have adverse effects on banks' profit-making abilities.
In addition, a number of the big banks might be on the hook for billions of dollars worth of lawsuits and other claims from investors who say that banks mislead them into buying low-grade products, including the widely misunderstood mortgage-backed securities that helped precipitate the global financial collapse. Given the fact that taxpayers had to foot bill for the expensive bailouts that have kept these large companies afloat, few are sympathetic toward the banks' predicament.
Bank of America, the largest American bank by assets, has already agreed to pay $12.7 billion to angry investors and has set aside an additional $18bn for potential claims in the future, reports Christina Rexrode of the Associated Press (via ABC News).
All of the unpleasant news has resulted in a sharp decline in share prices across the industry. The KBW bank index is down over 25% year-to-date.
"Investors need more certainty about when banks' mortgage problems might be over," adds Rexrode.
It is important to note that the financial sector is indispensable. Although, in light of the shifting landscape, it is unclear which firms will exit this drawn-out fiasco on top -- it is clear that none will emerge unscathed.
To help you begin searching for a financial-sector champ, here is a list of companies that have defied the meltdown. These stocks have seen share price gains over the past month while investors have battered most others. Do you think this bullish trend will last?
List sorted by share price performance (month). (Click here to access free, interactive tools to analyze these ideas.)
1. Donegal Group
2. Cohen & Steers
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 Andrew Dominguez does not own any of the shares mentioned above. Data sourced from Finviz.