In this article, we discuss the 5 finance stocks to buy during interest rate hikes. If you want to read about some more finance stocks to buy as interest rates rise, go directly to 10 Finance Stocks to Buy During Interest Rate Hikes.
5. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 84
Bank of America Corporation (NYSE:BAC) provides banking and financial products. Hedge funds have been loading up on the stock as interest rates rise. At the end of the fourth quarter of 2021, 84 hedge funds in the database of Insider Monkey held stakes worth $47 billion in Bank of America Corporation (NYSE:BAC), compared to 72 in the previous quarter worth $46 billion.
On February 3, JPMorgan analyst Vivek Juneja kept an Overweight rating on Bank of America Corporation (NYSE:BAC) stock and raised the price target to $53.5 from $52.5, highlighting “higher rates, the recovery in consumer spending and loan growth” as catalysts for the stock.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Bank of America Corporation (NYSE:BAC) was one of them. Here is what the fund said:
“Higher long-term interest rates supported financials such as Bank of America Corporation (NYSE:BAC), which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America Corporation (NYSE:BAC) announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
4. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 75
The Goldman Sachs Group, Inc. (NYSE:GS) provides a range of financial services. On February 17, the company boosted targets on return-on-investment, assets, and wealth management, outlining that it expected the wealth management business to grow at a compound annual growth rate of 12% this year.
The Goldman Sachs Group, Inc. (NYSE:GS) remains one of the top finance stocks in the hedge fund universe. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Eagle Capital Management is a leading shareholder in The Goldman Sachs Group, Inc. (NYSE:GS) with 3.5 million shares worth more than $1.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and The Goldman Sachs Group, Inc. (NYSE:GS) was one of them. Here is what the fund said:
“Financial services firm The Goldman Sachs Group, Inc. (NYSE:GS) is a best-in-class franchise with a premier brand that attracts top talent and sustains market share across its businesses. We believe this has helped Goldman weather recent market volatility. In addition to de-levering risk-weighted assets, The Goldman Sachs Group, Inc. (NYSE:GS) is also growing its digital investment footprint through the expansion of features on its Marcus Invest platform. The company’s stability—and ability to grow its brand even in tough times—has kept us invested over the long term.”
3. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 97
Citigroup Inc. (NYSE:C) is a diversified financial services firm. Hedge funds have been piling into the stock as inflation rises. At the end of the fourth quarter of 2021, 97 hedge funds in the database of Insider Monkey held stakes worth $6.6 billion in Citigroup Inc. (NYSE:C), compared to 79 the preceding quarter worth $5.5 billion.
On March 14, Wells Fargo analyst Mike Mayo kept an Overweight rating on Citigroup Inc. (NYSE:C) stock with a price target of $70. The company has expanded an exit from Russia in recent weeks as the US places sanctions on Moscow for the Ukraine invasion.
In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Citigroup Inc. (NYSE:C) was one of them. Here is what the fund said:
“We fully exited position in Citigroup Inc. (NYSE:C). Global financial services company Citigroup Inc. (NYSE:C) made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
2. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 107
JPMorgan Chase & Co. (NYSE:JPM) is a financial services firm. The bank has an impressive dividend history stretching back more than two decades. It has increased the payout consistently over the past nine years. On March 15, it declared a quarterly dividend of $1 per share, in line with previous. The forward yield was 3.02%.
Elite hedge funds hold large stakes in JPMorgan Chase & Co. (NYSE:JPM). Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in JPMorgan Chase & Co. (NYSE:JPM) with 7.4 million shares worth more than $1.1 billion.
In its Q4 2020 investor letter, Bretton Fund, an asset management firm, highlighted a few stocks and JPMorgan Chase & Co. (NYSE:JPM) was one of them. Here is what the fund said:
“After a strong performance in 2019, we wrote this about our bank stocks in last year’s report: “There will be another recession sooner than later, and our banks will see larger loans losses, but we think this is more than priced into the stock, and our banks are well reserved for that eventuality.” Little did we know “sooner” really meant “a few weeks from now.” Despite the economic shock, the banks still have huge capital cushions that can absorb large loan losses. Our remaining bank investments, JPMorgan Chase & Co. (NYSE:JPM) and Bank of America, increased their reserves significantly at the beginning of the Covid-19 crisis in anticipation of imminent loan defaults, but with the government stimulus and perhaps a more resilient economy than many would have guessed, actual loan losses are up only slightly. They might happen later in 2021, but with an additional stimulus package and the vaccine rolling out, the large-scale losses may not be as bad as most people predicted. The bigger drag on the banks’ earnings power is lower rates, which in our opinion will persist for a long time. Despite this drag, we estimate both JPMorgan Chase & Co. (NYSE:JPM) and Bank of America will continue to grow revenue and earnings over the next few years, while we believe their stocks remain bargains in a somewhat expensive market. JPMorgan’s earnings per share declined 17% last year, and its stock returned -5.5%. Bank of America’s earnings, which are more sensitive to interest rates, were down 32%, and its stock returned -11.6%.”
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 108
Berkshire Hathaway Inc. (NYSE:BRK-B) is a conglomerate with interests in the insurance, freight rail transportation, and utility businesses. The hedge fund sentiment around the stock is largely positive. At the end of the fourth quarter of 2021, 108 hedge funds in the database of Insider Monkey held stakes worth $19.3 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 106 in the preceding quarter worth $19.4 billion.
On March 21, Berkshire Hathaway Inc. (NYSE:BRK-B) announced that it had agreed to purchase investment holding firm Alleghany in a deal worth around $11.6 billion. In the past six months, the stock has returned nearly 25% to shareholders in an otherwise volatile marketplace.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway Inc. (NYSE:BRK-B). Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway Inc. (NYSE:BRK-B) has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
You can also take a peek at Why These 10 Stocks Are Trending on Monday and 10 ETFs to Buy and Hold for the Next 10 Years.
