4. Capital One Financial Corporation (NYSE:COF)
Expected Earnings Growth 2024: 4.60%
Latest P/E Ratio: 10.53
Warren Buffett’s Q2 2024 Stake: $1.36 Billion
Number of Hedge Fund Investors as of Q2 2024: 65
Capital One Financial Corporation (NYSE:COF) is one of the best value stocks to invest in, according to Warren Buffett, for diversifying an investment portfolio into the financial service sector. The company is mostly focused on credit cards, auto loans, banking, and savings accounts.
The shares of Capital One Financial Corporation (NYSE:COF) have demonstrated solid gains in value over the last twelve months, thanks to solid fundamentals and deliberate expansion plans. Moreover, the possibility of lower interest rates might decrease the expenses associated with deposits, boosting earnings since Capital One provides rates that are competitive with online services.
It remains well-positioned for growth due to strategic acquisitions, high rates, a strong balance sheet, and a solid Credit Card segment. Its acquisition of Discover Financial for $35.3 billion should position it in a solid position to transform the credit card industry landscape and, therefore, unlock substantial shareholder value.
Capital One Financial Corporation (NYSE:COF) has recently reached an impressive milestone, climbing to a 52-week peak and showing a notable gain over the past year, with a 57.91% rise. This achievement highlights the firm’s robust standing in the consumer finance sector and its sustained ability to pay dividends for 30 years straight, which could boost investor trust.
Amid the significant share price gain, Capital One Financial Corporation (NYSE:COF) is still trading at a discount, going by its price-to-earnings multiple of 10.53 compared to the industry average. While it posted 1% revenue growth in the second quarter, its full-year earnings are expected to grow by 4.60% as it also continues to reward investors with a 1.59% dividend yield.
As of Q2 2024 end, 65 out of the 912 hedge funds covered by Insider Monkey’s database had bought and owned Capital One Financial Corporation (NYSE:COF) shares. Natixis Global Asset Management’s Harris Associates was the largest shareholder courtesy of its $2.10 billion stake.
Here is what Sound Shore Management said about Capital One Financial Corporation (NYSE:COF) in its fourth quarter 2023 investor letter:
“Long-term holding Capital One Financial Corporation (NYSE:COF) was also one of our better performers this quarter. The company boasts a diversified deposits base with about 80% FDIC insured, well above industry average. It is the only major bank 100% in the cloud, which enables better underwriting and quicker response to changes in the environment. This technology also helps reduce operating and fraud cost while freeing up cash flow for reinvestment in marketing to grow products (Venture X card) and build its brand. Periods of stress, like we saw in the banking sector during March, are a reminder of the underwriting acumen and high quality deposits of Capital One. We added to our position after the fallout, knowing that the company’s seasoned management team had steered capably through previous cycles. Today, as credit card delinquencies have risen to more normal levels, Capital One is already reporting a slowing in delinquency growth. Conversely, some peers saw prior underwriting missteps begin to surface in 2023. Currently trading at 9 times 2024 consensus earnings and around book value, we remain enthusiastic about the investment.”
