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Fisher Investments on Financials by Jarred Kriz, Fisher Investments

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CHAPTER 8

FINANCIALS INVESTING STRATEGIES

This chapter covers various investment strategies specifically for a Financials allocation, building on the knowledge in this book. The strategies include:

1. Adding value at the sector level
2. Adding value at the country or industry level
3. Adding value at the security level

While the strategies presented here are by no means comprehensive, they’ll provide a good starting point for constructing a portfolio that can increase your likelihood of outperforming a benchmark. They should also spur some investment strategy ideas of your own. After all, using this framework to discover information few others have discovered yet is what investing is all about.

Also, though these strategies focus solely on Financials, they are meant to be used as part of an overarching strategy for a portfolio managed against a broader benchmark. Some investors may choose to manage a portfolio only of Financials stocks (or any other single sector). But in our view, for individual investors, managing against a broader benchmark increases both risk management and outperformance opportunities.

ADDING VALUE AT THE SECTOR LEVEL

Consistent with the top-down method, investors must first determine when it is appropriate to overweight or underweight the Financials sector relative to a broader portfolio benchmark. Some major factors contributing to this decision, covered in depth in Chapter 1, are shown in Table 8.1. Each driver should be considered not on its own, but ...

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