“XLF” might be down 20% year-to-date but Cheryl Pate says there are subsectors within “financials” that look quite opportunistic here. She’s the Portfolio Manager at Angel Oak Capital Advisors.
Pate’s remarks on CNBC’s ‘Power Lunch’
One such area that pops out to her is regional and community banks. Explaining why this afternoon on CNBC’s “Power Lunch”, Pate said:
We see the best relative value in regional and community banks. These are pure-play spread-based lenders, making money off the difference between loans and deposits costs. So, these are the purest way to play the rates moving up.
The U.S. Federal Reserve “could” raise interest rate by an uncommunicated 75 bps on Wednesday after a worse-than-expected CPI print for May on Friday that pushed the S&P 500 index into a bear market territory.
Stocks she likes in particular
Names she likes include Pinnacle Bank, Signature Bank, and SVB Financial Group (NASDAQ: SIVB) – all of which are down big for the year. Defending her picks, Cheryl Pate noted:
Names we recommend are ones that’ve been higher growth by geographical area or business strategy. A lot of these are serial acquirers and have demonstrated track record. So, I think there’s a lot of upside to the fundamentals.
Another reason that she likes regional and community banks more than their bigger rivals is a rather limited exposure to the consumer and the capital markets. She’s also bullish on the Columbia-headquartered SouthState Corp (NASDAQ: SSB).
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