The S&P 500 Index recorded its best August over the past 36 years as investors rotated into the beaten-down segments of the year — cyclicals. The index jumped 7% along with Nasdaq, Dow Jones and Russell 2000, which were up in the range of 5.5-11%.

Major technology companies’ resilience to the coronavirus crisis supported the momentum. Also, several positive developments on the COVID-19 vaccine-related front and the reopening of the economy supported the rally.

However, the trend reversed late last week after the S&P 500 pared gains and lost 4.3% over the last two trading sessions. A huge rally in the high-profile tech names, which caused overvaluation concerns, led to the correction.

Nonetheless, the S&P 500 is still up 53% from its March lows and 6.5% year to date.

There are some signs of rotation in to the sectors that were left behind by the stock market rally. While the S&P tech index plunged more than 7% and communications services along with consumer discretionary sectors each dropped almost 5% over the last two trading days, the financials declined just 0.8%.

So, before it’s too late, one should take advantage of the current market sell off and add some fundamentally strong finance stocks. But before we check out which stocks are worth considering, let’s first dig deeper and understand why the finance sector looks promising now.

Why Finance Sector?

The financial sector remains one of the worst performers in the S&P 500 Index. While the sector has rallied 42.8% from its Mar 23, 2020 low, it is still down 18% so far this year.

The year had begun on a positive note for the sector. Strong economic growth and favorable operating backdrop despite lower rates (the Federal Reserve had cut rates thrice last year) supported the sector.

However, following the coronavirus pandemic, the central bank cut the interest rates to near-zero in mid-March to provide additional support to the U.S economy for combating the coronavirus-related slowdown. This unfavorable development significantly hurt the sector’s financial performance, with woes related to economic slowdown and stay at home orders further hampering normal business activities.

Nonetheless, with positive developments on several fronts, including the above-mentioned factors seem to have led to bullish investor sentiments. Also, better-than-expected jobs report and a fall in unemployment rate to 8.4% in August from record high of 14.7% in April indicate better days ahead of the U.S. economy.

Thus, the finance sector, which is mainly depended of health of the economy, is likely to benefit from the same. Also, positive comments related to government aids continuing till the year end is expected support the sector.

5 Finance Stocks That Outpaced the S&P 500 YTD

Here are a handful of finance sector stocks, which have managed to outperform the S&P 500 so far this year. These companies currently carry a Zacks Rank #2 (Buy) or better. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Also, these stocks witnessed positive estimate revisions for the past two months and have a market cap of more than $1.5 billion.

Mr. Cooper Group Inc. COOP, based in Coppell, TX, provides quality servicing, origination and transaction-based services largely to single-family residences. It has a market cap of $1.69 billion. The Zacks Consensus Estimate for the company’s earnings has been revised 85.3% and 7.8% upward, over the past 60 days, for 2020 and 2021, respectively. The stock, which currently sports a Zacks Rank #1, has rallied 46.7% year to date.

Headquartered in Westlake Village, CA, PennyMac Financial Services, Inc. PFSI provides mortgage banking and investment management services. The company, with a market cap of $3.66 billion, currently sports a Zacks Rank of 1. Over the past two months, the company’s earnings estimates have risen 39.6% and 12.7% for 2020 and 2021, respectively. It has surged 48.5% so far this year.

Based in Richmond, VA, Kinsale Capital Group, Inc. KNSL offers various insurance and reinsurance products. The company has a market cap of $4.09 billion. The company’s earnings estimates have risen 11.6% for 2020 and 17.7% for 2021 over the past two months. The stock, which currently sports a Zacks Rank #1, has jumped 85.6% year to date.

KKR & Co. Inc. KKR is a major private equity and real estate investment firm specializing in direct and fund of fund investments. Headquartered in New York, the company has a market cap of $30.17 billion and currently carries a Zacks Rank #2. Over the past two months, earnings estimates have been revised 13.8% and 7.7% upward for 2020 and 2021, respectively. The company’s shares have rallied 22.3% so far this year.

Goosehead Insurance, Inc GSHD is based in Westlake, TX and has a market cap of $3.71 billion. The company provides personal lines insurance agency services. The consensus estimate for earnings has moved 43.9% and 23.9% upward for 2020 and 2021, respectively, over the past 60 days. The company’s shares have surged 138.6% year to date. It carries a Zacks Rank of 2.