Fisher Investments on Financials

This installment of the Fisher Investments On series is a comprehensive guide to the Financials sector, the largest sector in most broad equity indexes around the world and the lifeblood of the global economy.

This reliable guide can help you in making top–down investment decisions specifically for the Financials sector. It shows how to determine better times to invest in Financials, which Financials industries and sub–industries are likelier to do best, and how individual stocks can benefit in various environments. The global Financials industry is large and complex, with the major part of the sector located outside the United States. Using the framework detailed in this book, you can learn to be better equipped to identify opportunities and avoid major pitfalls.

Given the vast market landscape and diverse geographic operations, it is vital to maintain a global perspective when investing in the Financials sector. This invaluable resource provides the tools to help you understand and analyze opportunities both in the United States and abroad within this sector.

Foreword ix

Preface xi

Acknowledgments xv

Part I Introduction 1

Chapter 1 Financials 101 4

Financials Sector Breakdown 23

Financials Basics 3

Part II Industry Group Details 31

Chapter 2 Banks 101 34

Types of Banks 45

Banks Industry Group Characteristics 48

Bank Regulation 53

Banks 33

Chapter 3 Capital Markets 64

Consumer Finance 76

Diversified Financial Services 80

Diversified Financials 63

Chapter 4 Characteristics of Insurers 84

How Do Insurance Companies Make Money? 89

How Do Insurance Companies Act? 94

Regulation 98

Insurance Industry Group 83

Chapter 5 What Is a REIT? 105

REIT Characteristics 108

A Representative Example: Annaly Capital Management 112

Equity REIT Sub–Industries 115

Unique Measurements for REITs 118

Real Estate Industry Group 103

Part III Thinking Like a Portfolio Manager 121

Chapter 6 Investing Is a Science 123

The Top–Down Method 126

Top–Down Deconstructed 131

Managing Against a Financials Benchmark 139

The Top–Down Method 123

Chapter 7 Make Your Selection 144

A Five–Step Process 145

Financials Analysis 153

Security Analysis 143

Chapter 8 Adding Value at the Sector Level 160

Adding Value at the Country or Industry Level 161

Adding Value at the Security Level 162

Financials Investing Strategies 159

Appendix A: Reference Material 165

Appendix B: Derivatives 171

Appendix C: Risk–Adjusted Balance Sheet 175

Notes 179

About the Author 185

Index 187

JARRED J. KRIZ has been in the financial ser–vices industry since 1997, with experience in the banking, investment banking, brokerage, and asset management fields. He regularly presents to audiences at investing workshops across the country and currently works as a Senior Capital Markets Research Analyst at Fisher Investments with a focus on the Financials sector and macroeconomic strategy.

About Fisher Investments Press
Fisher Investments Press brings the research, analysis, and market intelligence of Fisher Investments′ research team, headed by CEO and New York Times bestselling author Ken Fisher, to all investors. The Press covers a range of investing and market–related topics for a wide audience from novices to enthusiasts to professionals.