Five Cheap Finance Stocks to Buy Right Now

Though the broader market has recouped nearly all of the losses it suffered earlier in the year, most financial stocks are trading deep in the red currently. This decline has taken a lot of investors by surprise since it has turned the popular notion that financial stocks soar in a rising interest rate environment upside down. While most investors are still wary of buying financial stocks right now, analysts feel that a lot of investors’ fears are overblown and financial stocks are currently trading at attractive levels. Taking that into account, we at Insider Monkey thought of compiling a list of financial stocks that are cheap to buy i.e. trade under $10 per share, but had the backing of several hedge funds going into 2016. Read further, to know which are the five stocks that topped our list.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 First Niagara Financial Group Inc. (NASDAQ:FNFG)

– Investors with Long Positions (as of December 31): 26

– Aggregate Value of Investors’ Holdings (as of December 31): $250.84 million

Let’s start with First Niagara Financial Group Inc. (NASDAQ:FNFG), which saw its popularity among hedge funds inch down by one during the fourth quarter, but the aggregate value of their holdings jumped by $82 million during the same period. Interestingly, all the four largest shareholders of the company among the funds we track initiated a stakeduring the fourth quarter, including Clint Carlson‘s Carlson Capital which acquired 4.72 million shares. In October last year, shares of the bank holding jumped significantly after KeyCorp (NYSE:KEY) announced that it would be acquiring the company for $4.1 billion. Though First Niagara Financial Group Inc. (NASDAQ:FNFG)’s stock has given up all of those gains since then and is trading down around 9% year-to-date, this decline has helped in raising its stock’s annual dividend yield to over 3%.

#4 Genworth Financial Inc (NYSE:GNW)

– Investors with Long Positions (as of December 31): 28

– Aggregate Value of Investors’ Holdings (as of December 31): $192.42 million

Genworth Financial Inc (NYSE:GNW)’s stock has been on a consistent decline in the last two years, losing 82.2% of its value during that period. After hitting a new 52-week low of $1.57 this year in February,  it quickly changed its trajectory and  has doubled since then. However, it is still trading down over 16% year-to-date. During the fourth quarter, the ownership of the stock among funds covered by us remained constant, but the aggregate value of their holdings in it fell by $40 million. Billionaire David E. Shaw‘s D. E. Shaw reduced its holding in the company by one-third to 1.86 million shares during the quarter. On March 11, the company announced that it has settled a securities class-action suit against it for $219 million, $150 million of which will be covered by insurance. It also revealed that it would be incurring $10 million in legal fees and accruals related to the suit over the amount it has already spent.

#3 WMIH CORPORATION (NASDAQ:WMIH)

– Investors with Long Positions (as of December 31): 34

– Aggregate Value of Investors’ Holdings (as of December 31): $170.51 million

Once a premier subsidiary of the country’s largest savings and loan association, Washington Mutual, Inc., WMIH CORPORATION (NASDAQ:WMIH) is now just a special purpose acquisition company (SPAC) controlled by KKR & Co. L.P. (NYSE:KKR). According to the last available data from the company it had nearly $6 billion of NOLs (net operating loss). During the fourth quarter the popularity of WMIH CORPORATION (NASDAQ:WMIH) among hedge funds tracked by us remained nearly unchanged. Shares of the company are currently trading down by 3.27% year-to-date, but comfortably above their technical support of $2.25. Few analysts who cover the stock feel that it is undervalued right now and will start moving higher as soon as the company starts making acquisitions.

#2 Regions Financial Corp (NYSE:RF)

– Investors with Long Positions (as of December 31): 36

– Aggregate Value of Investors’ Holdings (as of December 31): $949.06 million

Regions Financial Corp (NYSE:RF) is the holding company of Alabama-based Regions Bank. The number of investors covered by us with long positions in the stock inched up by one and the aggregate value of their holdings in it increased by 8.7% during the fourth quarter. Notable funds which reduced their stakes in the company during that time included billionaire Ken Griffin‘s Citadel Investment Group, which cut its holding by 37% to 8.19 million shares. Like most other banking stocks, shares of Regions Financial Corp (NYSE:RF) have also got beaten down aggressively this year and are trading down almost 15%  year-to-date. However, due to this decline, the annual dividend yield of the stock has increased significantly and is now very close to the 3% mark. On March 9, analysts at Deutsche Bank reiterated their ‘Hold’ rating and $9 price target on the stock.

#1 MGIC Investment Corp. (NYSE:MTG)

– Investors with Long Positions (as of December 31): 42

– Aggregate Value of Investors’ Holdings (as of December 31): $1.02 billion

Amid a 4.6% decline of MGIC Investment Corp. (NYSE:MTG)’s stock during the fourth quarter, its ownership among funds tracked by us came down by five and the aggregate value of their holdings declined by $321 million. The further 13.3% drop that the stock of the mortgage service provider has suffered so far this year has resulted in it now trading at a low trailing P/E of 2.98 and a price-to-book multiple of only 1.19. For its fiscal 2016 first quarter, analysts expect the company to report EPS of $0.22 on revenue of $258.33 million. For the same quarter of the previous financial year, MGIC Investment Corp. (NYSE:MTG) delivered EPS of $0.26 on revenue of $270.20 million. On March 1, Standard & Poor’s Ratings Services upgraded the credit rating of the company to ‘BBB’ from ‘BB+’ citing the improvements in its delinquencies and the continued growth displayed by its business despite facing competitive headwinds. Billionaire John Paulson‘s Paulson & Co. reduced its stake in the company by 76% to 2.73 million shares during the October-December period.

Disclosure: None