To The Moon

🌟🌟🌟The S&P500 and Dow Jones Index closed at record highs on Wednesday trading.  The 3Q 2024 earnings season will kick off with the US major banks reporting on October 11.  Leading the pack is JPMorgan and Well Fargo.

$Financial Select Sector SPDR Fund(XLF)$ represents the best US financial institutions in just 1 ETF.  These include banks, insurance companies, capital markets, mortgage real estate investment trusts and consumer finance companies. 

The Top 10 holdings include Berkshire Hathaway, JPMorgan Chase, Visa Inc, Mastercard, Bank of America, Wells Fargo, S&P Global, Goldman Sachs, American Express and Progressive Corp.

The Top 10 holdings weightage is 53.9%.  Total number of holdings is 72.  The expense ratio is 0.09%, among the lowest compared to similar competing ETFs.  Dividends are paid every 3 months.  The current dividend yield is 1.46%.  XLF goes ex dividend on December 23 2024.  XLF is the largest ETF in the Financial Sector with Assets Under Management of USD 42.64 billion.  

$Berkshire Hathaway(BRK.B)$  is the top holding with 13.2% weightage.  Warren Buffett is the Chairman and CEO of Berkshire Hathaway.  This company has joined the Trillion Dollar Club in August 29 2024.  In fact Berkshire is the only US  company that is not a technology company to do so. 

Berkshire Hathaway has been selling off his 2 top stocks - Apple and Bank of America in recent times.  As a result Berkshire has USD 277 billion in cash and equivalent on its balance sheet.  This gives it unparalleled financial flexibility to take advantage of opportunities that may arise but is also generating lots of interest income  for Berkshire in the interim period. 

$JPMorgan Chase(JPM)$  is the Top largest US bank and the 2nd highest holding of XLF at 9.5% weightage.  All eyes will be on Jamie Dimon, CEO when JPMorgan reports its Q3 24 on Friday October 11.

For 3Q 24, expectations are for JPMorgan's revenue to edge higher year on year by 2.4% to USD 41.7 billion.  In Q2 24, JPMorgan saw a 52% surge in investment banking fees year on year and a 21% jump in Equities trading revenue.  However this is weighed against a higher than expected build up in credit loss provisions (USD 3.05 billion versus USD 2.78 billion expected). 

With the Feds cutting interest rate, JPMorgan 's net interest income could be impacted.  However a potential improvement in loan growth and lower deposit costs may offer some cushion to net interest income. 

$Visa(V)$  and $MasterCard(MA)$  are the world' s 2 largest payment networks, offering a range of prepaid, credit and debit card options.  Take for example Visa.  There are 4.5 billion Visa cards in use globally, coupled with more than 130 million merchant locations that accept them.  

Visa reported a huge operating margin of 67%  in its fiscal 2024 3rd quarter that ended in June 30.  Having handled almost USD 4 trillion in payment volume and earning USD 8.9 billion in revenue in Q3, Visa has tremendous earnings power and free cash flow. 

Bank of America is the 2nd largest US bank followed by Wells Fargo, which is the 3rd largest US bank. 

These are just a snapshot of the Top 6 holdings in XLF. 

Performance wise XLF is up 21% year todate and in 2023, XLF has risen 38%.  But if we look further back to 5 years ago, XLF is up 65% and since its inception in December 16 1998, XLF has skyrocketed by 191%.

Wall Street Analysts are bullish on XLF with a Buy rating, Average Target Price of USD 48.62 according to 55 analysts surveyed by Tipranks. 

I have invested in XLF since 2022 as I find that it is a lot cheaper than buying individual stocks such as Berkshire Hathaway which has a higher entry point.  XLF offers excellent value for money while at the same it minimises my risk on single stocks. 

I have also been dollar cost averaging XLF every month using Tiger Brokers' Auto Invest which I find so convenient and useful. 

The US financial sector is the pillar of the US economy.  I believe that XLF is the best ETF that represents this important sector which will continue to grow exponentially in the years ahead. 

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