Why Is This Analyst Bullish About Financial Sector Stocks?

Financials have typically traded at about three-quarters of the S&P 500 multiple, so a price-to-earnings increase is likely for the entire financial sector, Oakmark Funds portfolio manager Bill Nygren said Wednesday on CNBCs "Squawk On The Street."

Next year's S&P 500 multiple estimates will be at about 20x earnings, while most of the financials today are barely double-digit, Nygren said. 

Goldman Sachs Group Inc GS and Wells Fargo & Co WFC are both in the Oakmont Funds portfolio, Nygren told CNBC.

Shares of Goldman Sachs and Wells Fargo are trading higher Wednesday after the companies reported better-than-expected first-quarter earnings per share.

Related Link: Recap: Goldman Sachs Q1 Earnings

This quarter serves as a really good reminder, especially with Goldman Sachs, that financials just don't report normal and bad quarters, they report quarters that are well above average, Nygren said. "If Goldman could annualize the quarter they just reported, they would be making $70 plus per share," he said, adding this is clearly not their forecast.

Price Action: Goldman Sachs was up 3% to $337.51 Wednesday afternoon.

Wells Fargo was up 5.18% to $41.85 Wednesday afternoon.

(Image by NikolayFrolochkin from Pixabay)