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Power Play: Betting on financials

A car enters a BankUnited branch in Fort Lauderdale, Florida.
Eliot J. Schechter | Bloomberg | Getty Images
A car enters a BankUnited branch in Fort Lauderdale, Florida.

There's a huge debate among money managers on the timing of the Fed's first interest rate hike, but one thing is clear, interest rates are headed higher. This is not necessarily bad for financials.

"If margins improve, small banks will see that more significantly and that will be a good thing," Dave Ellison, portfolio manager of the Morningstar four-star rated Hennessy Large Cap Financial Fund, told CNBC's "Power Lunch" on Wednesday.

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Some of Ellison's top picks in the small-cap space include BankUnited, Banner Corp, Clifton Bancorp, Associated Banc-Corp, and Synovus Financial.

But the key is no big surprises. "If there is a rise in rates, it has to be something slow and measured," Ellison said.

BankUnited, Banner Corp, Clifton Bancorp, Associated Banc-Corp, and Synovus Financial are all lower during trading.