by Ian Cooper
With all of the chaos in financial stocks, it’s time to buy the fear.
Remember, crises often create opportunities, as we’ve learned from some of the richest investors. Warren Buffett, for example, tells us to be “fearful when others are greedy, and greedy when others are fearful.” Sir John Templeton taught us to buy excessive pessimism.
Even Baron Rothschild once told investors, “The time to buy is when there’s blood in the streets, even if the blood is your own.”
For example, we can take advantage of the fear in financials with recent pullbacks.
Financial Select Sector SPDR Fund (XLF)
Over the last few weeks, the XLF ETF dropped from about $35 to $33.74, where it appears to have caught strong support. It’s also oversold on RSI, MACD, and Williams’ %R. In fact, if you pull up a one or two-year chart of the XLF, you can see that every time these three indicators drop into oversold territory at the same time, the ETF will pivot higher shortly after.
With an expense ratio of 0.10%, the XLF ETF holds positions in Berkshire Hathaway, JP Morgan, Visa, Mastercard, Bank of America, and Goldman Sachs to name a few.
SPDR S&P Regional Banking ETF (KRE)
Or, we can look at the SPDR S&P Regional Banking ETF (KRE), which is also technically oversold at the moment. From a current price of $41, we’d like to see the KRE ETF run back to about $45 a share, near-term. With an expense ratio of 0.35%, the KRE ETF holds a position in stocks, such as Western Alliance, Pinnacle Financial, New York Community, and Valley National.
Vanguard Financials ETF (VFH)
There’s also the Vanguard Financials ETF (VFH), which is just as oversold. With an expense ratio of 0.10%, the ETF has a position in JP Morgan, Berkshire Hathaway, Visa, Bank of America, S&P Global, Goldman Sachs, and Morgan Stanley to name a few of the top ones.