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Strategist: Beat-up bank stocks set for rebound

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As the beaten-down energy sector rebounded mightily this year, financial stocks remained in a rut. In fact, bank stocks are the worst-performing slice of the market in 2016. Morgan Stanley's stock strategist believes that is unfair.

"We've been preferring financials to energy based on better trends in growth in shareholder returns, better management teams and price action that has materially deviated from history," Morgan Stanley chief U.S. equity strategist Adam Parker wrote in a note to clients Monday.

Parker explains there's been an overreaction to the downside for bank stocks relative to the flattening of the yield curve, a major benchmark for the group's profitability. Meanwhile, energy stocks have rallied more than warranted by the oversold bounce in oil prices, according to the strategist.

The Financial Select Sector SPDR Fund fell 3 percent year-to-date through Friday compared with the Energy Select Sector SPDR Fund up 8 percent and S&P 500 up 1 percent, respectively.

Here are the Morgan Stanley "overweight" rated financial stocks the strategist recommends.

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