Although the S&P 500 ended Tuesday just two points from its record high, Jack Ablin, chief investment officer of BMO Private Bank, still sees opportunities in the financial-services and healthcare sectors.
The KBW Index of bank shares has returned 8 percent over the last year, far behind the 17 percent return of the S&P 500.
"The financials are pretty cheap," Ablin told Yahoo.
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"Net interest margins are virtually nothing. But as the taper concludes, and potentially the 10-year Treasury rate rises, then net interest margins increase, lending potentially increases — certainly that’s what the Fed would like to see — and banks move to profitability."
The 10-year Treasury yield stood at 2.46 percent late Tuesday.
As for healthcare, “I think that healthcare in general, particularly pharma, is still pretty cheap," Ablin said.
"A lot of it is the Affordable Care Act overhang. I think that as investors learn more about that business and how these companies are making money, they will continue to [make money] as they will have a whole new army of customers.”
When it comes to financials, Jeff Reeves, editor of InvestorPlace.com, recommends Wells Fargo, Blackstone Group and Toronto-Dominion Bank.
"Wells Fargo is a bit pricey now that it trades for a price-to-book ratio of about 1.6," he writes.
"But it if you’re going to play in the admittedly troubled waters of the financial sector, then it may be prudent to pay a small premium for a quality stock, instead of digging around in the mud for a bargain buy that may have a rather nasty balance sheet."
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