Seizing the Opportunity in Surging Financial Stocks

Financial stocks were once not favored by many investors, but this seems to be changing. The S&P Financial Select Sector Index has risen about 21% so far this year, outperforming the $S&P 500 Index (.SPX.US)$'s gain of 15.73%.

Although Buffett recently reduced his stake in $Bank of America (BAC.US)$, casting a negative sentiment on the sector, several insurance stocks including $Progressive (PGR.US)$, $Allstate (ALL.US)$, $Aflac Inc (AFL.US)$, and $Arthur J. Gallagher (AJG.US)$ have reached all-time highs.

So far this year, $Progressive (PGR.US)$’s shares have climbed an impressive 60.37%. The company announced strong second quarter results, primarily benefiting from two main tailwinds, as stronger pricing is boosting underwriting results and higher interest rates are producing stronger investment income. The Progressive’s Q2 earnings per share of $2.65 beat the analyst consensus estimate of $1.99. The bottom line improved more than five times year over year.

Similarly, benefiting from continually increasing premiums and investment returns, both $Allstate (ALL.US)$ and $Aflac Inc (AFL.US)$ have announced better-than-expected earnings for the second quarter, with their shares increasing by 37.87% and 36.2% respectively so far this year.

So far this year, $JPMorgan (JPM.US)$ has risen by 33%, and $Goldman Sachs (GS.US)$' stock price has increased by nearly 30%, both significantly outperforming the approximately 16% gain of the S&P 500 Index.

Moreover, Financial services companies $KKR & Co (KKR.US)$, $American Express (AXP.US)$, and $Fiserv (FI.US)$ have also delivered impressive performance, with their stocks rising 42.74%, 35.63%, and 30.7% respectively so far this year.