KBW analysts recommend these 11 financial stocks after the market sell-off

By Steve Gelsi

Highlighted stocks fall into two categories: oversolh or idiosyncratic with catalysts. Both types offer 'positive risk/reward.'

As financial stocks bounced back Tuesday from steep losses, KBW Research has recommended 11 financial stocks for investors to consider buying based on two categories: oversold or idiosyncratic with catalysts.

Oversold implies the stocks are cheap relative to the balance sheet value and earnings power of each bank.

KBW defines "idiosyncratic" stocks as dependent on interest rates, plus they may offer specific characteristics such as a pending merger or capital-raising deal.

"The common denominator is a positive risk/reward skews based on our upside/downside analysis," said analyst Matthew Kelley.

Based on its view that the stocks are oversold, KBW is recommending insurance giant AIG (AIG), regional bank Popular Inc. (BPOP), mortgage insurance and reinsurance specialist Essent Group Ltd. (ESNT), retirement and insurance company Corebridge Financial Inc. (CRBG) and money manager LP Financial Holdings Inc. (LPLA).

Under its the of "idiosyncratic with catalysts", KBW said it's got favorable views of trust bank BNY Corp. (BK), bank and asset manager UMB Financial Corp. (UMBF), insurance and banking firm Renasant Corp. (RNST) and Metropolitan Bank Holding Company(MCB), which is a large regional bank.

Two other stocks, Capital One Financial Corp. (COF) and Discover Financial Services (DFS) fit into both the "idiosyncratic with catalysts" and oversold categories at once.

"Recent underperformers look broadly attractive in our baseline assumption of a soft landing, but this sub-sector performancedispersion could continue if growth fears deepen," KBW's Kelley said. "We therefore tactically recommend that investors allocate new capitaltowards stocks that have overpriced downside macro risk, including LPLA."

All 11 stocks that KBW mentioned have "outperform" ratings.

Meanwhile, the KBW Nasdaq Bank Index BKX rose 1.3% and the Financial Select Sector SPDR ETF XLF advanced by 1.7%, as the market rebounded from a bloodbath in the previous session.

Also read: Stock Market Today: Dow grows over 1% as global markets rally following selloff

-Steve Gelsi

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08-06-24 1134ET

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