Though the broader market has recouped nearly all of the losses it suffered earlier in the year, most financial stocks are trading deep in the red currently. This decline has taken a lot of investors by surprise since it has turned the popular notion that financial stocks soar in a rising interest rate environment upside down. While most investors are still wary of buying financial stocks right now, analysts feel that a lot of investors’ fears are overblown and financial stocks are currently trading at attractive levels. Taking that into account, we at Insider Monkey thought of compiling a list of financial stocks that are cheap to buy i.e. trade under $10 per share, but had the backing of several hedge funds going into 2016. Read further, to know which are the five stocks that topped our list.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 First Niagara Financial Group Inc. (NASDAQ:FNFG)
– Investors with Long Positions (as of December 31): 26
– Aggregate Value of Investors’ Holdings (as of December 31): $250.84 million
Let’s start with First Niagara Financial Group Inc. (NASDAQ:FNFG), which saw its popularity among hedge funds inch down by one during the fourth quarter, but the aggregate value of their holdings jumped by $82 million during the same period. Interestingly, all the four largest shareholders of the company among the funds we track initiated a stakeduring the fourth quarter, including Clint Carlson‘s Carlson Capital which acquired 4.72 million shares. In October last year, shares of the bank holding jumped significantly after KeyCorp (NYSE:KEY) announced that it would be acquiring the company for $4.1 billion. Though First Niagara Financial Group Inc. (NASDAQ:FNFG)’s stock has given up all of those gains since then and is trading down around 9% year-to-date, this decline has helped in raising its stock’s annual dividend yield to over 3%.
#4 Genworth Financial Inc (NYSE:GNW)
– Investors with Long Positions (as of December 31): 28
– Aggregate Value of Investors’ Holdings (as of December 31): $192.42 million
Genworth Financial Inc (NYSE:GNW)’s stock has been on a consistent decline in the last two years, losing 82.2% of its value during that period. After hitting a new 52-week low of $1.57 this year in February, it quickly changed its trajectory and has doubled since then. However, it is still trading down over 16% year-to-date. During the fourth quarter, the ownership of the stock among funds covered by us remained constant, but the aggregate value of their holdings in it fell by $40 million. Billionaire David E. Shaw‘s D. E. Shaw reduced its holding in the company by one-third to 1.86 million shares during the quarter. On March 11, the company announced that it has settled a securities class-action suit against it for $219 million, $150 million of which will be covered by insurance. It also revealed that it would be incurring $10 million in legal fees and accruals related to the suit over the amount it has already spent.