Performance by market capitalization
Large-cap stocks above $10 billion make up 87.26% of the Financial Select Sector SPDR Fund (XLF). As of November 6, 2015, these stocks have returned -0.1% YTD (year-to-date) but have gained 6.4% in the trailing one-month period.
In comparison, small-cap stocks—those under $10 billion market capitalization—have lost 0.4% YTD and have gained 5.3% over the previous month as of November 6. In part, this performance has been fueled by market sentiment based on robust fundamentals and strong domestic economic conditions, in which smaller, nimbler companies have been able to take advantage of market opportunities.
But overall, investors have still chosen to stay invested in large-cap banks because they are typically safer bets during periods of uncertainty—even while small-cap stocks have been trading at a one-year forward PE (price-to-earnings) ratio of 29.19x, compared to the PE ratio of 26.91x that large-cap stocks have seen as of November 6.
Market cap analysis of banks
Large-cap banking stocks make up 46.8% of XLF’s portfolio. These stocks gained by 8.9% in October while small-cap banking stocks gained by 9.9%. And while YTD, large-cap banking stocks within the ETF have risen by 1.4%, small-cap banking stocks have risen by 6.6%.
Clearly, small-cap stocks have been the outperformers in a bull market.
But large-cap diversified banks make up 25% of XLF’s portfolio. They have gained 2.6% YTD as of November 6. In comparison, the small-cap diversified financials stocks have gained by a mere 0.4% YTD.
Best and worst performers
On a YTD basis, the best performers among large-cap banks include Northern Trust Corporation (NTRS) and Bank of New York Mellon Corporation (BK). These two institutions have gained by 11.8% and 9.7%, respectively, YTD. Meanwhile, the worst-performing large-cap banks include Morgan Stanley (MS) and State Street Corporation (STT). As of November 6, these two institutions have lost 8.9% and 5.3%, respectively, YTD.
Continue to the next and final part of this series for a look at analyst recommendations for the biggest US banks, given their RSIs (relative strength index).