Spain, like Italy, was whipsawed by the worry over contagion. Carlos Berastain, an analyst at Deutsche Bank AG in Madrid, made the ranks of best analysts with his calls on Banco Santander SA, Spain's biggest bank, and Banco Bilbao Vizcaya Argentaria SA.

He put "buy" ratings on the banks in June 2009, and by February of this year, they were up 27% and 17%. He then rated them "hold," and they dropped 25% and 28% through August 31.

"I found that the early 2011 rally and bullishness would be difficult to sustain," Berastain, 36, says. "Downgrading these names was not the most consensual or obvious thing to do, but in perspective it was the right thing to do."

In the U.S., the 2011 performance of financial company stocks was tightly linked to the crisis in Europe, with prices rising and falling with each new wave of optimism or fear, says Donald Selkin, New York-based chief market strategist at National Securities Corp., which manages about $3 billion. That's because of U.S. banks' Europe-linked risks and the 2008 financial crisis, which showed how the collapse of a big bank such as Lehman Brothers Holdings Inc. can reverberate around the globe, Selkin says.

Basel III
In addition, all big banks will be affected by the deliberations of the Basel Committee on Banking Supervision, which is finalizing new, more-stringent capital requirements, known as Basel III, for financial institutions deemed "systemically important."

"It's a very challenging environment because a lot of the financial names tend to trade together in this environment," says David Konrad, an analyst at New York-based KBW Inc. "So you look for near-term catalysts like quarterly earnings to use in your stock picking, which will allow the stock to deviate from the macro pressures."

Konrad, 46, is a repeat winner in Bloomberg's analyst ranking. His best calls included a "buy" on JPMorgan Chase & Co.  in March 2009. The stock was up 83% as of August 31, including a 7% point drop in August. Konrad also put a "hold" on U.S. Bancorp in October 2008 at $31.46 and then reinstated a "buy" when it fell to $21.23 on Oct. 2, 2009. The stock rose 12% from that date to August 31.

Konrad recommends Goldman Sachs, the fifth-biggest U.S. bank by assets, because of its strong market share and low valuation.
Buckingham Research Group's David Hochstim, a 20-year financial services analyst veteran, says regulatory uncertainty, the economic slowdown and the volatile environment have been "very unpleasant and painful" for the analyst community. His calls on American Express Co., Capital One Financial Corp., MasterCard Inc. and Visa Inc.  made him the best analyst of consumer finance stocks in the U.S.

"The European crisis is running on its third year," New York-based Hochstim says. "The credit card stocks I follow have held up a lot better than a lot of bank stocks, in part because they don't have significant exposure to other financial institutions. But they are vulnerable to the economic environment and high unemployment."

Hochstim recommends investors buy Visa and MasterCard shares because he says the world's largest consumer-payment networks will benefit from the long-term global growth in electronic payments.