Brokerage Stocks Are Booming — Still Time to Buy: Tom Lydon

Although financial stocks remain well off of their 2007 highs, some have been clawing their way back. Brokerage stocks have rebounded with such force that they’re among the top-performing sectors year-to-date, benefiting as investors slowly come back to the market. Trading volume has also improved in the past few months.

New and existing clients brought $7.5 billion in net new assets to Charles Schwab in May, trading jumped 22 percent and total assets were valued at $1.22 trillion.

TD Ameritrade stock has almost doubled in the past three months while snatching up trading company Thinkorswim for $606 million.

NYSE Euronext had a double recently, too. Some think signs of an improving economy and stock market could further increase trading volume and open the doors for IPOs coming back to the marketplace.

An easy way to get exposure to these and other companies in this thinly sliced sector is via iShares Dow Jones U.S. Broker-Dealers . This ETF is up 40.3 percent in the last three months, up 71.8 percent rom the March 9 market low and it’s sitting 3.4 percent above its 200-day moving average.

The iShares fund seems to benefit from its exposure to the non-banking segment of the financial sector. IAI did take its licks, however; it’s still down 58 percent off its high from more than two years ago. But investors are clearly showing their interest — and brokers are once again becoming profitable.

Despite the positive moves in the financial sector, there’s still some reason for caution. Financials remain fragile, and probably will stay that way for some time. If you want exposure to this sector, protect yourself by using the 200-day moving average as a guide for when to buy and when to sell.



Tom Lydon is the editor of ETF Trends and author of iMoney: Profitable ETF Strategies for Every Investor.