These financial stocks are well-positioned to benefit from a rising rate environment.
Top Financial Stocks To Watch Now For The Long Term Portfolio
Financial stocks have traditionally been solid investments in the stock market. With U.S. Treasury Secretary Janet Yellen signaling that a slightly higher interest rate environment would be a plus for society, many investors are turning to top financial stocks that could see their profit margins expand as rates climb. While banks may be the first thing that comes to your mind, there are also several other types of companies that could benefit as well.
You see, there are plenty of choices for you when it comes to looking for the best financial stocks to buy. But today, we are not talking about DogeCoin or other cryptocurrencies. Admittedly, the financial sector is very broad indeed, covering banks, insurance, financial services, fintech, and more. If anything, rising rates tend to point to a strengthening economy. And the financial space is an excellent sector to place your bet on. Now, if you share the same sentiment that financial stocks could benefit from rising rates, do you have these top financial stocks, available to purchase on the stock market, on your watchlist right now?
Top Financial Stocks To Watch In A Reopening Economy
- JPMorgan Chase (NYSE: JPM)
- Bank of America (NYSE: BAC)
- Visa (NYSE: V)
- PayPal (NASDAQ: PYPL)
- Berkshire Hathaway (NYSE: BRK.B)
JPMorgan is hands down one of the most profitable of the big global banks, and it’s also the largest bank by market capitalization in the U.S. The bank’s recent success is primarily driven by its credit card and auto loan businesses.
It’s also one of investors’ favorite financial stocks because of its low valuation. The company appears undervalued from the price metrics with its P/E ratio and P/B ratio well under industry averages. JPM stock has been up by over 30% year-to-date.
From its first-quarter fiscal results, the company posted revenue of $33.1 billion, which was up by 14%. Net income for the quarter was a whopping $14.3 billion, a 399% increase year-over-year. Its diluted earnings per share for the quarter was $4.50. A chunk of this revenue came from its Consumer & Business Banking segments, with net revenues of $5.6 billion. Considering the impressive quarterly earnings and seemingly low valuation, would you say JPM stock is a top financial stock to buy right now?
Bank of America
Bank of America or BAC is another favorite financial stock among investors because the bank is seeing moderate loan growth in the second quarter. This is reassuring considering most banks in the first quarter saw total loan balances declining from the end of 2020.
Furthermore, BAC has also made major improvements in efficiency as it has been working on its online and mobile technology. The bank also said that it plans to raise its dividend along with increasing share repurchases, should the bank pass the annual stress test this year.
The company was one of the first few to kick-start the first-quarter earnings. From there, the company also posted total revenue of $22.8 billion for the quarter. Total net income was $8.1 billion, more than double what it was a year ago. The majority of this income came from its consumer banking segment at $2.7 billion and global markets segment at $2.1 billion. Deposits were up by 25% to a staggering $924 billion. With such an impressive quarter, will you consider adding BAC stock to your watchlist?
Visa is a payments technology company that connects its users through electronic payments. The company enables global commerce through the transfer of value and information among participants. From the company’s latest fiscal report, Visa posted revenue of $5.73 billion and net income of $3.0 billion.
In addition, the company saw payment volume grow 11% in the quarter. This goes to show that recovery is well underway after the pandemic has impacted spending trends, especially with international travel largely stalled.
You could say that credit card companies have taken full advantage of the reopening theme. Visa also received another boost this week after an upgrade from analyst Christopher Donat. The analyst upgraded the financial stock to overweight from neutral, saying in a note to clients over the weekend that the stock looked cheap relative to Mastercard (NYSE: MA). Considering that the US economy is recovering pretty quickly, is V stock worth your attention now?
Coming up next is a leading fintech player, PayPal. For the uninitiated, the online payments company offers a plethora of financial services to consumers. These range from online money transfers to even cryptocurrency-related services.
In terms of scale, if digital payments are available, PayPal likely operates in that region. In fact, the company’s strongest ever first-quarter results are a key testament to PayPal’s dominance in the digital payments space.
From the fiscal report, the company posted revenue of $6.03 billion, which beat analysts’ expectations. First-quarter net profit rose to $1.10 billion from $84 million a year earlier. Also, the company saw its total payment volume surge by 50% year-over-year to $285 billion. This strong quarter demonstrates the sustained momentum in PayPal’s business as the world continues to shift to the digital economy. With strong fundamentals and a dominant industry position, is PYPL stock a buy-and-hold investment?
Berkshire Hathaway may not be your typical financial stock at a first glance, but it is an insurance company at its core. For those unfamiliar, the company has three main insurance divisions, the auto insurance businesses GEICO, the reinsurance division, and general insurance. One of the reasons why the group has been so successful as a financial company is because of its willingness to stomach large, complex risks that other companies may not be willing to underwrite.
The company also happens to own large stakes in several major US banks. If you are not sure how to pick a winner from losers amongst the financial companies, an investment in Berkshire Hathaway may be an option to consider. And that is because of its highly diversified portfolio.
Most of Berkshire Hathaway’s investment portfolio is tied up largely to bank stocks and consumer goods businesses. These two sectors are not only benefiting from the reopening plays but it is also poised to benefit from a rising rate environment. Considering all these, would you place your bet on BRK.B stock right now?
Originally Posted on June 8, 2021 – 5 Financial Stocks To Watch In A Rising Interest Rate Environment
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from StockMarket.com and is being posted with permission from StockMarket.com. The views expressed in this material are solely those of the author and/or StockMarket.com and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.
Disclosure: Author Security Holding: No Positions
The author does not hold any positions in the financial instruments referenced in the materials provided.
Disclosure: Digital Assets
Trading in digital assets, including cryptocurrencies, is especially risky and is only for individuals with a high risk tolerance and the financial ability to sustain losses. Eligibility to trade in digital asset products may vary based on jurisdiction.