Deep Dive: Bank and insurance stocks had an outstanding November, but this part of the financial sector did even better

The two financial sectors represent extremes, the first being steady but cyclical mainstays, while fin-tech players are innovating and growing quickly.

Analysts argue that some of the best-known financial-technology stocks, including PayPal PYPL, +1.52% and Square SQ, -2.17%, are fully valued, at least based on their consensus 12-month price targets. But in tables below you can see some impressive sales-growth projections for the next two years.

We’ll begin by looking at the Global X FinTech ETF, which was established in 2016 and has $863 million in assets under management. Then we’ll move on to the S&P 500 financial sector.

Here’s a chart comparing the performance in November of the ETF with the S&P 500 financial sector and the full S&P 500 Index SPX, +1.28% :

(FactSet)

And here’s how the three groups have performed for all of 2020.

(FactSet)

So all three have had similar patterns of crashing and recovering, but the Global X FinTech ETF has been a much better performer year-to-date.

Exploring financial technology

The Global X FinTech ETF holds 33 stocks of financial-technology companies operating in developed markets worldwide. It is weighted by market capitalization, and that’s how the group is sorted in the following tables. Here’s how the group performed in November and for all of 2020:

Scroll the table to see all the data.

Here’s a summary of ratings and price targets among analysts polled by FactSet for the Global X FinTech ETF stocks. The list is sorted by the upside potential implied by consensus price targets (share prices and targets are in local currencies):

If you scroll the table, you can see that for PayPal, which has nearly doubled this year, the consensus price target is only 4% higher than the closing share price on Nov. 30. For Square, the target price is now behind the Nov. 30 closing price.

But it’s important to keep in mind that those price targets only go out 12 months. The stock market rewards revenue growth, and for PayPal, Square and many other companies held by the ETF, sales are expected to continue to rise by double digits over the next two years. Here are calendar-year revenue growth projections through 2022:

The Global X FinTech ETF is a reasonable way to ride along with the financial-technology growth trend. If you wish to consider any individual companies listed here, it is best to do your own research and form your own opinion about each one’s ability to compete and grow over the next 10 years.

Big, old financials

Here’s a roundup of how the 11 sectors of the S&P 500 performed during November and how well they have done this year, along with the full S&P 500 Index and the Dow Jones Industrial Average DJIA, +0.90% :

The energy sector was the strongest performer in November. Like the financial sector, energy is cyclical and with its special problems of low demand and very low oil prices, the economic recovery setup can lead to tremendous gains over the next two years.

Best performers in November

Here are the 10 best-performing financial stocks among the S&P 500 during November:

Dividend yields are also included — you can see them if you scroll the table.

Several of the best performers in November are still down significantly for 2020, especially Wells Fargo & Co. WFC, +3.51%, which has tumbled 47%.

But with the sector weighted by market capitalization, it is also important to see how the largest companies have performed. These’s some overlap with the list of November’s best performers:

Analysts’ favorites among the S&P 500 financials

Stepping back to the entire group of 65 companies in the S&P 500 financial sector, here are the 10 with majority ‘buy’ or equivalent ratings among analysts, with the most upside potential implied by consensus 12-month price targets:

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