Jefferies says it's not too late to buy financial stocks, upgrades sector to overweight

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Jefferies upgraded small- and mid-cap financial stocks to overweight, telling investors there's still time to get behind the group even with the strong gains since the presidential election.

"We are moving to an overweight from a market weight on financials and realize that we are certainly not early to the party. However, the sector has cooled a bit year to date from its tremendous run after the election, and the reporting season has gone really well," equity strategist Steven DeSanctis wrote in a note to clients Monday.

"We have liked the banks for some time, but we think there are other groups such as capital markets, consumer finance, and insurance industries that look positive," said DeSanctus, who specializes in smaller stocks.

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This year, financial stocks are about unchanged following a double-digit surge for most of the shares from the election to the end of 2016.