In this article, we discuss the 10 Best Financial Services Stocks to Buy Now. You can skip our detailed analysis of the finance sector, and go directly to read 5 Best Financial Services Stocks to Buy Now.
Financial stocks suffered a lot due to the pandemic-driven recession as global stock markets declined over 30% after the respective governments issued restrictions. As stated by KPMG International, the STOXX North America 600 banks index suffered a significant decline of 31.23% in the first three months of the pandemic. However, the sector is getting back on its feet, especially as major financial services companies announced positive Q3 earnings and are moving towards their biggest annual gain since 1997, as mentioned by Bloomberg.
During the second quarter of 2021, the finance sector attracted over $32 billion in investments, as investors regained their confidence due to the economic recovery, as reported by Wall Street Journal. Also, the financial sector is all set to reach the mark of $28.5 trillion in value by 2025, with a current value of $22.5 trillion, growing at a CAGR of 9.9%. This being said, the popularity of financial services stocks is stoked up by the ongoing digital transformation. Financial technology, more commonly known as fintech, is accelerating the process of digital payments, a practice exercised during the pandemic. Organizations and individuals around the world shifted their focus to online banking. This comes in line with a report published by Global X, which states that the number of active online banking users reached 1.9 billion in 2020 and is projected to reach 2.5 billion by 2024.
According to the latest report of the Federal Deposit Insurance Corporation (FDIC), the institutions insured by the agency reported a net income of over $6.5 billion in Q3 of 2021, presenting a 35.9% growth from the prior-year quarter. The report further acknowledged the banking sector’s role in economic growth. The Dow Jones U.S. Financial Services Index delivered a 33.6% return to shareholders in the past year, outperforming a 24.7% return of S&P 500 during the same period. Due to the solid performance in 2021, investors now turn towards financial stocks owing to their contribution to the nation’s economy, according to CNBC’s Jim Cramer. He further established that the recent market rally was due to the surge seen in bank stocks.
Some of the notable financial services stocks include JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), The Goldman Sachs Group, Inc. (NYSE:GS), and Bank of America Corporation (NYSE:BAC), among others.
Our Methodology:
Let’s analyze our list of the best financial services stocks to buy now. The stocks mentioned below belong to the banking and finance sector. For this list, we considered the analysts’ ratings and future growth potential of the companies. Along with this, the hedge fund sentiment was measured using data from 867 hedge funds tracked by Insider Monkey in Q3.
Best Financial Services Stocks to Buy Now
10. Focus Financial Partners Inc. (NASDAQ:FOCS)
Number of Hedge Fund Holders: 16
Focus Financial Partners Inc. (NASDAQ:FOCS) is an American investment adviser company which provides services related to finances and investment management.
At the end of Q3, 16 hedge funds in Insider Monkey’s database reported owning stakes in Focus Financial Partners Inc. (NASDAQ:FOCS). The total value of these stakes is over $101 million. Among these hedge funds, Soros Fund Management held the largest stake in Focus Financial Partners Inc. (NASDAQ:FOCS) in Q3, worth over $40 million.
Focus Financial Partners Inc. (NASDAQ:FOCS) announced its Q3 results on November 4 and reported a 28.8% growth in its organic revenue. The company’s EPS for the quarter stood at $0.98, which beat analysts’ estimates by $0.02. Following the company’s earnings beat in Q3, BMO Capital raised its price target on Focus Financial Partners Inc. (NASDAQ:FOCS) to $77, while maintaining an Overweight rating on the shares.
Like JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), The Goldman Sachs Group, Inc. (NYSE:GS), and Bank of America Corporation (NYSE:BAC), Focus Financial Partners Inc. (NASDAQ:FOCS) is one of the notable stocks in 2021.
Wasatch Global Investors mentioned Focus Financial Partners Inc. (NASDAQ:FOCS) in its Q2 2021 investor letter. Here is what the firm has to say:
“We’re excited about several new portfolio holdings in the Fund. For example, during the second quarter, we purchased Focus Financial Partners, Inc. (FOCS). Focus Financial provides holistic wealth management services. The company offers financial planning, asset allocation, asset management and tax preparation. What we like most about Focus Financial is that the company is taking ownership stakes in independent, ultra-high-net worth investment advisory firms around the world. This is attractive for the advisory firms because they: (1) get to continue operating with significant independence; (2) gain access to an expanded menu of top-notch products and services for clients; (3) get to maintain their legacy as a high quality firm; and (4) receive immediate cash in exchange for giving up some ownership. Focus Financial has seen extremely strong revenues and earnings because it has the infrastructure to rapidly grow the investment advisory firms that were started by talented entrepreneurs. Of all businesses, advisory firms achieve some of the best economies of scale due to the fact that fixed costs pale in comparison to asset-based revenues.”
9. Franklin Resources, Inc. (NYSE:BEN)
Number of Hedge Fund Holders: 28
Franklin Resources, Inc. (NYSE:BEN) is an American investment management company that also provides related financial services to its consumers. On November 2, the stock surged 6% after Citigroup noted the company’s improved underlying fundamentals. The firm lifted its price target on Franklin Resources, Inc. (NYSE:BEN) to $43, while upgrading the shares to Buy.
In its fiscal Q4 results, Franklin Resources, Inc. (NYSE:BEN) posted an EPS of $1.26, beating the consensus by $0.40. The company earned $2.18 billion in revenues, presenting a 27.5% growth from the prior-year quarter. Since the start of 2021, Franklin Resources, Inc. (NYSE:BEN) delivered a 34.6% return to shareholders, while its 12-month gains stood at 46.6%.
As of Q3 2021, Insider Monkey’s database reported 28 hedge funds holding stakes in Franklin Resources, Inc. (NYSE:BEN), compared with 30 in the previous quarter. The total value of these stakes is roughly $360 million, up significantly from $205.1 million in Q2 of 2021.
8. Comerica Incorporated (NYSE:CMA)
Number of Hedge Fund Holders: 31
Even though Comerica Incorporated (NYSE:CMA) saw a reduction in the number of hedge funds holding stakes in the company, the stock surged as the company announced solid Q3 earnings. Comerica Incorporated (NYSE:CMA) reported a 2% quarter-over-quarter growth in net interest income, about 3% higher than the consensus.
Ken Griffin’s Citadel Investment Group was the largest stakeholder of Comerica Incorporated (NYSE:CMA) in Q3, owning over 1.8 million shares. In addition to this, 31 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q3, down from 33 in the previous quarter. The total worth of these stakes is roughly $645 million, up from $547 million in Q2.
Wall Street analysts presented a positive outlook on Comerica Incorporated (NYSE:CMA) recently. Both Citigroup and RBC Capital lifted their price targets on the stock to $100 and $95, respectively. The latter’s analyst appreciated the company’s solid fundamental trends. In the past year, Comerica Incorporated (NYSE:CMA) gained 61.5%.
Like JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), The Goldman Sachs Group, Inc. (NYSE:GS), and Bank of America Corporation (NYSE:BAC), Comerica Incorporated (NYSE:CMA) is a notable finance stocks to watch in 2021 and beyond.
7. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 59
The Charles Schwab Corporation (NYSE:SCHW), an American financial services company, reported a 5% growth in client assets in October, compared with the previous month. With the significant growth in customers over the years, The Charles Schwab Corporation (NYSE:SCHW) remains one of the best financial services stocks to buy now.
As per Insider Monkey’s Q3 data, The Charles Schwab Corporation (NYSE:SCHW) suffered a decline in the number of hedge funds having stakes in the company. On the whole, 59 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q3.
This October, Morgan Stanley appreciated the company’s accelerated customer growth and raised its price target on The Charles Schwab Corporation (NYSE:SCHW) to $115 while maintaining an Overweight rating on the shares. The firm’s analyst also expects the company’s EPS to reach $7 by fiscal 2026. As of the close of December 2, The Charles Schwab Corporation (NYSE:SCHW) is up 45.05% year to date.
Lakehouse Capital mentioned The Charles Schwab Corporation (NYSE:SCHW) in its Q2 2021 investor letter. Here is what the firm has to say:
“Charles Schwab is not a household name in Australia but it is in the US where it is the largest discount broker with more than 32 million brokerage accounts, 2 million corporate retirement plans, and total client assets of US$7.4 trillion. Schwab’s shares performed extremely well during the year thanks to a confluence of factors including a strong stock market with the S&P 500 up 39% year-on-year, the company’s recent merger with industry heavyweight TD Ameritrade, and expectations that interest rate income would grow as the US economy gained steam.
Two other important contributors to Schwab’s year, which were a mix of cyclical and structural, were an increase in net new accounts and increased trading activity. We view these as cyclical in the sense that markets are performing very well and that retail investors have been bored and emboldened during the American lockdowns, however, also structural because Schwab’s shift to $0 commissions on equity trades has permanently reduced a barrier to trading for investors with smaller accounts. We also note that, while brokerage activity is cyclical, the average brokerage account itself is very sticky — we estimate normalised annual retention rates for accounts of better than 93% — and that the average client assets per account grow over time thanks to asset growth and clients collectively being net savers.
Schwab makes for an excellent natural hedge for the Fund as Schwab tends to perform well when interest rates increase, which is generally negative for the rest of the portfolio. And the position did its job for us by increasing during a rising interest rate environment, enabling us to harvest much of our gains from Schwab and redeploy them to shares of other growth companies that had gotten cheaper in response to higher rates. We’re mindful of the run in the shares and the cyclical nature of the business but comfortable keeping a small position for now given Schwab’s natural hedging dynamics, extremely loyal customers, and an industry-leading position in a growing market.”
6. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 65
Morgan Stanley (NYSE:MS) is an American investment bank and financial services company, headquartered in New York. Recently, the company announced the development of a private share offering program to allow its clients to invest in private companies, with an admission price of approximately $20 million. The program is expected to go live next year.
In Q3, Morgan Stanley (NYSE:MS) reported solid earnings, mainly driven by acquisitions. The company’s institutional securities net revenue rose to $7.5 billion, from $6.1 billion during the same period last year. Acknowledging the strong quarterly earnings of Morgan Stanley (NYSE:MS), Citigroup raised its price target on the stock in October to $105, with a Neutral rating on the shares.
At the end of Q3 2021, 65 hedge funds tracked by Insider Monkey reported owning stakes in Morgan Stanley (NYSE:MS), compared with 69 in the previous quarter. The total value of these stakes is roughly $5 billion. Of these hedge funds, Eagle Capital Management held the largest stake in the company, worth $1.4 billion, in Q3.
Morgan Stanley (NYSE:MS) is also gaining ground among investors in the banking sector like JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), The Goldman Sachs Group, Inc. (NYSE:GS), and Bank of America Corporation (NYSE:BAC).
In its Q2 2021 investor letter, ClearBridge Investments mentioned Morgan Stanley (NYSE:MS) among other stocks. Here is what the firm has to say:
“The Strategy also benefited from strong showings from financials holdings such as recent addition Morgan Stanley, a leading bank holding company offering a variety of financial services worldwide, and one of the largest broker-dealers, investment banks and wealth managers in the U.S. Morgan Stanley has been a leader in helping direct capital to address global sustainability challenges. Its sustainability efforts include capital markets actions such as issuing green bonds and it was early in its support for sustainability in investing and its concern for the environment. Morgan Stanley reported a great quarter with record revenues and strength across the businesses as it works to integrate and find synergies with recent acquisition E*TRADE. Following stress tests for banks, Morgan Stanley increased its dividend and share repurchase plan more than expected.”
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Disclosure. None. 10 Best Financial Services Stocks to Buy Now is originally published on Insider Monkey.
