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Analyst: These Three Financials Better than the Rest

As stocks plummeted in its worst session since August, it was banks who were hit the hardest Wednesday.

All ten S&P 500 sectors ended more than one percent lower and all 30 stocks in the Dow Industrial Average fell after reports confirmed the economic recovery is struggling.

But banks felt the most pain, with names like Bank of America falling four percent and JPMorgan closing down three percent.

In fact, banks are the only down sector this year on the S&P 500.

So what’s the trouble with financials?

According to Ticonderoga Securities' Managing Director and Senior Analyst Douglas Sipkin, it began with the regulatory and capital uncertainty for the first quarter and a half of the year.

“Now you thrown in a weaker macro-economic tape and it’s almost like adding gas to the fire,” he said.

When looking for a trade, Sipkin suggested looking for company-specific stories that are unique and “above and beyond the overall macro-economic environment.”

To that end, there are some names Sipkin likes in the financial space.

The only asset manager he is recommending right now is BlackRock because of the growth of passive investing, the dividend payouts to shareholders and the big buy back it did last week with Bank of America.

“Most of the asset mangers are levered to commodities and a weak dollar,” he said, “so if you get some of that reversal it’s paying for the asset managers.”

Sipkin said Jefferies and Lazard are also interesting. Both will benefit from the regulations that are being imposed on the large institutions, but he said you need a little better cyclical tone.

Sipkin thinks Lazard in particular is very interesting because it’s a “low growth cheap financing environment.” He also thinks we’re starting to see mergers and acquisitions pick up and believes we may see a possible balance sheet restructuring story with the company.

In the end, Sipkin reiterated that it is unique, specific names that counts in this space right now because it looks like a lot of regulatory uncertainty, combined with bad economic news, is the recipe for more selling.


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Trader disclosure: On June 1, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by “Fast Money” traders; Accounts Managed by Brian Kelly Capital own (ANDE) calls; Accounts Managed by Brian Kelly Capital own (BHP); Accounts Managed by Brian Kelly Capital own (IAU); Accounts Managed by Brian Kelly Capital own (NLY); Accounts Managed by Brian Kelly Capital own (NEM); Accounts Managed by Brian Kelly Capital own (TLT) calls; Accounts Managed by Brian Kelly Capital own Aussie dollar; Accounts Managed by Brian Kelly Capital own Canadian dollar; Accounts Managed by Brian Kelly Capital own Swiss franc; Accounts Managed by Brian Kelly Capital own Hong Kong dollar; Accounts Managed by Brian Kelly Capital own Mexican peso; Accounts Managed by Brian Kelly Capital own Swedish krona; Accounts Managed by Brian Kelly Capital are short yen; Terranova owns (XOM); Terranova owns (KSS); Terranova owns (CVI); Terranova owns (OXY); Terranova owns (TM); Terranova owns (BJ); Terranova owns (DIS); Terranova owns (PFE); Terranova owns (V); Terranova owns (HPQ); Terranova owns (FLX); Terranova owns (JPM); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (VRTS); Terranova is short (DELL)

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MIke Khouw
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Joe LaVorgna
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