Conventional wisdom says that financial stocks - especially those of banks - tend to do poorly when interest rates are on the rise. So with rates at historic lows, now is a terrible time to buy financial stocks, right?

Wrong.

In this case, the Wall Street chestnut that an incipient rise in rates is a "sell" signal for financial stocks is much too simplistic. True, plain-vanilla banks that derive the majority of their profits from lending can get dinged when rates go up, but a lot of banks have substantial revenues from sources that aren't sensitive to interest rates, and some banks are a lot less sensitive to rising rates than others are. Moreover, some financial-services companies - such as investment banks - aren't directly affected by rates one way or the other.

Some quick background on how your average bank makes a buck:

In a nutshell, banks borrow at relatively flexible short-term rates, lend at relatively sticky long-term rates and make money on the difference. The "cost of goods" for a bank is analogous to the rate it pays on its deposits - that 1 percent you're getting on your savings account - while revenues are closely tied to the rate charged by the bank for commercial and consumer loans. Because banks generally need to change the rates they pay depositors fairly frequently to stay competitive but loan rates are renegotiated only every so often, a steady rise in rates can narrow the difference between the two and hurt a bank's profits.

However, most banks are a lot less tied to the interest-rate cycle than they have been in the past. Fifteen years ago, large banks derived about 30 percent of their operating revenue from noninterest sources such as account fees and asset management. Now, that figure is more than 45 percent.

Also, the folks wringing their hands over the prospect of higher rates tend to ignore that the Fed generally starts to raise rates when the economy starts perking up - and a better economy means more loans and few loan losses for banks, which is a good thing.

So, although rising rates will hurt profit growth at some banks, it's not exactly Armageddon for every company in the financial-services area. (And no, I'm not predicting an imminent rise in interest rates - trying to predict where rates will go in the short term is a losing proposition - but it seems reasonable to expect that rates will be higher in a few years than they are now.) With that in mind, I canvassed our financial-services analysts to see which companies they thought look attractive. Here are their four favorites:

FleetBoston Financial (FBF): For years, Fleet tried unsuccessfully to be all things to all people, offering as many products as Citigroup (for example) even though it was only a fraction of the size. As a result, Fleet spread itself too thin, never achieved any economies of scale in any one area and became essentially a collection of mediocre businesses that didn't contribute much to each other.

Recently, however, Fleet put its Robertson Stephens investment-banking unit up for sale and announced it would scale back its venture capital and corporate-lending businesses. As a result, the company will be able to focus more on its excellent New England banking franchise while not wasting money in other areas. The stock yields almost 4 percent, and it doesn't take much in the way of operational improvements for the shares to be worth $48, which is our current fair value.

J.P. Morgan Chase (JPM): Granted, this company has made about as many missteps as possible over the past year. Enron, Argentina - you name a financial trouble spot, and odds are good that Morgan Chase was involved. But, as usual, Wall Street overreacted and started pricing the stock as if it were near collapse, rather than simply having a bad run. The bottom line is that this is a compelling - though risky - stock.

Washington Mutual (WM): Although WaMu has had quite a run over the past few months, we've raised our fair value as well. Rising rates mean that the company, the nation's largest thrift, won't post the huge, refinancing-fueled earnings growth of the past year, but higher rates aren't a death knell either. WaMu does a good job hedging its interest-rate exposure and also has a large consumer-banking operation. Moreover, at 10 times this year's earnings, you're not paying much to own a piece of this superbly managed company.

Fannie Mae (FNM): This is a controversial stock and comes with more than a little political risk. (Every once in a while, someone in Congress calls for Fannie's head, and the shares dip a little.) On balance, though, Fannie still looks like a solid core holding.