5 Medalists Swimming Against the Tide in Financials

Financial stocks, particularly bank stocks, have had a long stretch of poor performance. The financial crisis of 2008 was the most painful period, of course, but the sector has often struggled since then as well. Over the past decade through Aug. 16, 2016, financial sector funds trailed the Russell 1000 Value Index and the S&P 500 by an annualized 4.4 and 5.9 percentage points, respectively. Due to renewed concerns over the accuracy of banks’ book values and their ability to generate solid returns on equity in the future, the performance gap is similar over the trailing three years (coinciding roughly with the last time the S&P’s financials weighting peaked in mid-2013), and the past 12 months stand out as a particularly trying time.

Some of our favorite U.S. large-cap equity funds see significant investment opportunities in the beleaguered sector, so they sport big financials stakes—and have seen their recent performance suffer as a result. Let’s take a closer look at those funds that earn Morningstar Analyst Ratings of Gold or Silver and have weightings in financials that at least double the S&P 500’s recent 13.8%.

Allianz NFJ Dividend Value NFJEX

This large-value fund recently stashed 27.6% of its assets in financials, which is twice the S&P 500’s stake and well above the Russell 1000 Value’s 22.3% and the category average of 19.8%. Four of the fund’s largest six holdings reside in the sector: banks

Invesco Comstock ACSTX

Lead manager Kevin Holt and company boosted this large-value fund’s financials stake from 24.2% in mid-2013 to roughly 30% three years later. The fund added to longtime holdings

JPMorgan Value Advantage JVAAX

This Silver-rated large-value fund has typically had a big stake in financials—it was 30.7% in mid-2013, and it’s 29.5% now. Nevertheless, manager Jonathan Simon has navigated the rise and fall of the sector fairly well during his 11-year tenure; the fund held up a bit better than its typical peer in 2008, and underperformed modestly both in 2015 and in 2016 through July 16. He’s recently favored banks over insurance companies because he finds their valuations more compelling and believes they’ll benefit more quickly from rising rates. He’s focused on better-managed banks such as Wells Fargo and

Oakmark OAKMX, Oakmark Select OAKLX

Bill Nygren, the veteran lead manager of both of these Gold-rated large-blend funds, doesn’t always focus heavily on classic value stocks. Instead, he buys companies of all stripes that are trading at a big discount to his estimate of their private-market value. Indeed,

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