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15 Best Financial Stocks to Buy Now

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·20 min read
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In this article, we discuss the 15 best financial stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Financial Stocks to Buy Now.

On July 29, the United States Department of Commerce released a report detailing that the US economy had surpassed the pre-pandemic size with 6.5% growth recorded in the second quarter of 2021, a jump of 0.2% from the annual growth rate of 6.3% at the end of the first quarter. The report highlighted that the post-pandemic economic recovery was well underway. The finance sector, one of the main drivers of the US economy, is already evaluating the economic changes brought about by COVID-19 and their impact on the post-pandemic world.

Some of the best financial stocks on the market to watch out for in this regard include Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM), among others. As consumer and business spending surges - the recently released US government report highlighted that consumer spending was growing at an annual rate of close to 12% and business investment had increased by 8% in the second quarter - investors should keep their eye on big finance that is expected to reap immediate benefits from this post-pandemic economic boom.

However, larger changes are also afoot in the finance world. The dramatic rise of cryptocurrencies and financial technology companies threatens to shake the very foundations of centuries-old institutions. The increasing influence of retail investors on the overall market dynamics is also something that big finance will have to consider moving forward. Adapting to a new normal of intermittent lockdowns, as the spread of the Delta variant of the coronavirus shows, could also be key to the short-term future of the markets.

The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

15 Best Financial Stocks to Buy Now
15 Best Financial Stocks to Buy Now

STUDIO GRAND OUEST/Shutterstock.com

With this context in mind, here is our list of the 15 best financial stocks to buy now. These were ranked keeping in mind analyst ratings, hedge fund sentiment, and basic business fundamentals.

Best Financial Stocks to Buy Now

15. Coinbase Global, Inc. (NASDAQ: COIN)

Number of Hedge Fund Holders: N/A

Coinbase Global, Inc. (NASDAQ: COIN) is placed fifteenth on our list of 15 best financial stocks to buy now. The company’s shares have returned 5.5% to investors over the past five days. The company markets finance infrastructure and technology for crypto transactions. It is based in Delaware. On July 22, the firm announced that it would start accepting Dogecoin, a cryptocurrency that was started as a joke but has now reached over $26 billion in market capitalization, for commerce payments.

On July 7, investment advisory Oppenheimer maintained an Outperform rating on Coinbase Global, Inc. (NASDAQ: COIN) stock and raised the price target to $444 from $434, backing the firm to deliver strong results for the second quarter.

Coinbase Global, Inc. (NASDAQ: COIN) is the largest cryptocurrency exchange in the world in terms of the value of transactions and went public earlier this year at a record valuation of $86 billion at the end of the first day of trading.

Just like Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM), Coinbase Global, Inc. (NASDAQ: COIN) is one of the best financial stocks to buy now.

14. Fidelity National Financial, Inc. (NYSE: FNF)

Number of Hedge Fund Holders: 39

Fidelity National Financial, Inc. (NYSE: FNF) stock has returned 38% to investors over the past year. It is ranked fourteenth on our list of 15 best financial stocks to buy now. The firm mainly provides insurance products and is headquartered in Florida. In earnings results for the first quarter, posted on May 6, the firm reported earnings per share of $1.56, beating market predictions by $0.34. The revenue over the period was over $3 billion, up 92% compared to the revenue over the same period last year.

On July 9, investment advisory Barclays reiterated an Overweight rating on Fidelity National Financial, Inc. (NYSE: FNF) stock and raised the price target to $58 from $56, noting that the company was poised for strong growth in the months ahead.

Out of the hedge funds being tracked by Insider Monkey, Houston-based investment firm Windacre Partnership is a leading shareholder in Fidelity National Financial, Inc. (NYSE: FNF) with 11 million shares worth more than $455 million.

In its Q1 2021 investor letter, Merion Road Capital Management, an asset management firm, highlighted a few stocks and Fidelity National Financial, Inc. (NYSE: FNF) was one of them. Here is what the fund said:

“During the period I added to our position in Fidelity National Financial (“FNF”). FNF is the nation’s largest title insurer with 33% market share. It was built over the last 30 years by Bill Foley, who revolutionized the industry with his emphasis on eliminating bureaucracy, utilizing technology to streamline operations, and maximizing customer service. He is well-regarded as a savvy investor and consummate deal-maker having acquired and divested multiple entities both in title and ancillary fields. He continues to serve as the chairman of FNF with a personal stake in the company worth hundreds of millions.

While title insurance is technically insurance, it is a bit of a unique animal. Being that the insurer writes a policy based on past events, not unknowns in the future, losses are relatively small and predictable. The more data an insurer can analyze, the less likely they are to experience a claim; and the more efficiently they can analyze the data and process the application, the lower their costs will be. FNF has invested in automating its work stream through their ownership of NextAce (automated search), SoftPro (document production and closing), and multiple other cloud-based platforms. Due to these investments, FNF boasts industry leading margins and is able to attract more third party agents who can leverage their service offering..." (Click here to see the full text)

13. Capital One Financial Corporation (NYSE: COF)

Number of Hedge Fund Holders: 59

Capital One Financial Corporation (NYSE: COF) is a Virginia-based financial services holding company. It is placed thirteenth on our list of 15 best financial stocks to buy now. The company’s shares have returned 153% to investors over the past year. On July 22, the firm posted earnings results for the second quarter, reporting earnings per share of $7.71, beating market estimates by $3.17. The revenue over the period was more than $7.3 billion, up 12% year-on-year and beating estimates by $240 million.

On July 23, investment advisory BMO Capital maintained an Outperform rating on Capital One Financial Corporation (NYSE: COF) stock and raised the price target to $184 from $176, noting that the strong second quarter results from the firm would boost further growth.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Capital One Financial Corporation (NYSE: COF) with 6.5 million shares worth more than $828 million.

Alongside Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM), Capital One Financial Corporation (NYSE: COF) is one of the best financial stocks to buy now.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Capital One Financial Corporation (NYSE: COF) was one of them. Here is what the fund said:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. In financials, we increased our position in Capital One on the premise that a benign consumer credit environment should be sustainable in light of unprecedented government support.”

12. S&P Global Inc. (NYSE: SPGI)

Number of Hedge Fund Holders: 66

S&P Global Inc. (NYSE: SPGI) is ranked twelfth on our list of 15 best financial stocks to buy now. The stock has offered investors returns exceeding 20% over the course of the past year. The firm markets ratings and analytics solutions and is based in New York. In earnings results for the second quarter, posted on July 29, the firm reported earnings per share of $3.62, beating market estimates by $0.35. The revenue over the period was $2 billion, up 8% year-on-year and beating predictions by $110 million.

On July 8, investment advisory Morgan Stanley reiterated an Overweight rating on S&P Global Inc. (NYSE: SPGI) stock and raised the price target to $476 from $460, noting that debt issuance was continuing to outperform expectations.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Cantillon Capital Management is a leading shareholder in the firm with 2.3 million shares worth more than $845 million.

In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and S&P Global Inc. (NYSE: SPGI) was one of them. Here is what the fund said:

“S&P Global Inc. provides credit ratings, indexes, data, and analytics to the financial and commodities markets. Shares increased on strong fourth quarter results and 2021 guidance that exceeded Street expectations. Although bond issuance is expected to moderate after two years of exceptional growth, management still expects revenue to grow mid-single-digits this year. Also, shareholders overwhelmingly voted to approve the merger with IHS Markit. We continue to own the stock as we see a long runway for growth and significant competitive advantages for the company.”

11. The Goldman Sachs Group, Inc. (NYSE: GS)

Number of Hedge Fund Holders: 77

The Goldman Sachs Group, Inc. (NYSE: GS) stock has offered investors returns exceeding 89% over the course of the past twelve months. It is placed eleventh on our list of 15 best financial stocks to buy now. The company is headquartered in New York and markets an array of financial services. On July 20, Vestwell, a digital savings and investing program provider, announced that it had raised close to $70 million in a funding round led by big finance names that included Goldman Sachs.

On July 14, investment advisory Credit Suisse maintained an Outperform rating on The Goldman Sachs Group, Inc. (NYSE: GS) stock and raised the price target to $425 from $420, noting that the firm recently beat market estimates on earnings.

Out of 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 4.7 million shares worth more than $1.5 billion.

In addition to Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM), The Goldman Sachs Group, Inc. (NYSE: GS) is one of the best financial stocks to buy now.

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 Goldman Sachs 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, Goldman 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.”

10. Morgan Stanley (NYSE: MS)

Number of Hedge Fund Holders: 79

Morgan Stanley (NYSE: MS) is a New York-based financial holding company. It is ranked tenth on our list of 15 best financial stocks to buy now. The company’s shares have returned 97% to investors over the past year. On July 15, the firm posted earnings for the second quarter, reporting earnings per share of $1.89, beating market predictions by $0.23. The revenue over the period was $14.8 billion, up 8% compared to the revenue over the same period last year and beating estimates by $810 million.

On July 19, investment advisory Citi reiterated a Neutral rating on Morgan Stanley (NYSE: MS) stock but raised the price target to $97 from $88, noting the strong second quarter earnings beat by the company and underlining that the rating was based on valuation.

At the end of the first quarter of 2021, 79 hedge funds in the database of Insider Monkey held stakes worth $5.2 billion in Morgan Stanley (NYSE: MS), up from 66 in the preceding quarter worth $5.6 billion.

In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Morgan Stanley (NYSE: MS) was one of them. Here is what the fund said:

“Top three contributor Morgan Stanley, a leading global financial services company, came into the portfolio in Q4 as a result of its purchase of E*TRADE. E*TRADE is a great fit on Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked Morgan Stanley’s business by adding less volatile fee streams and deemphasizing the risk-obtuse culture of prior management. We believe the market will come to appreciate this mix shift over time.”

9. Citigroup Inc. (NYSE: C)

Number of Hedge Fund Holders: 90

Citigroup Inc. (NYSE: C) is placed ninth on our list of 15 best financial stocks to buy now. The stock has returned 36% to investors over the past twelve months. The firm provides various financial products and services. It is headquartered in New York. On July 14, the firm reported earnings for the second quarter, posting earnings per share of $2.84, beating market estimates by $0.88. The revenue over the period was more than $17 billion, beating market predictions by close to $290 million.

On July 6, investment advisory Keefe Bruyette assumed coverage of Citigroup Inc. (NYSE: C) stock with an Outperform rating and a price target of $85, highlighting that the advisory was constructive on large cap banks in general despite uncertainty.

At the end of the first quarter of 2021, 90 hedge funds in the database of Insider Monkey held stakes worth $6.9 billion in Citigroup Inc. (NYSE: C), down from 95 the preceding quarter worth $7.1 billion.

Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM) are some of the best financial stocks to buy now, just like Citigroup Inc. (NYSE: C).

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. Global financial services company Citigroup 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.”

8. Square, Inc. (NYSE: SQ)

Number of Hedge Fund Holders: 92

Square, Inc. (NYSE: SQ) is ranked eighth on our list of 15 best financial stocks to buy now. The company’s shares have returned 97% to investors over the past year. The firm markets various kinds of payment-accepting services and is based in California. On July 20, the firm announced that it was launching a new product, named Square Banking, that would help small businesses manage cash flows in one place. The share price of the company jumped more than 1.5% after the announcement was made.

On July 26, investment advisory Evercore reiterated an Outperform rating on Square, Inc. (NYSE: SQ) stock and raised the price target $353 from $317, noting that the Cash App of the firm had material upside to consensus profit estimates.

At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Square, Inc. (NYSE: SQ), up from 89 the preceding quarter worth $8.8 billion.

In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Square, Inc. (NYSE: SQ) was one of them. Here is what the fund said:

“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).

The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.

We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”

7. Wells Fargo & Company (NYSE: WFC)

Number of Hedge Fund Holders: 96

Wells Fargo & Company (NYSE: WFC) stock has offered investors returns exceeding 88% over the course of the past year. It is placed seventh on our list of 15 best financial stocks to buy now. The firm is based in California and provides different kinds of financial services. The firm manages close to $2 trillion in assets. On July 27, the firm declared a quarterly dividend of $0.20 per share, an increase of 100% from the previous dividend of $0.10 per share. The forward yield was 1.77%.

On July 15, investment advisory Barclays maintained an Equal Weight rating on Wells Fargo & Company (NYSE: WFC) stock and raised the price target to $50 from $46, appreciating the quarterly earnings results of the firm that beat market estimates.

At the end of the first quarter of 2021, 96 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Wells Fargo & Company (NYSE: WFC) , down from 99 in the previous quarter worth $8.7 billion.

Visa Inc. (NYSE: V), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), and JPMorgan Chase & Co. (NYSE: JPM) are some of the best financial stocks to buy now, alongside Wells Fargo & Company (NYSE: WFC).

In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Wells Fargo & Company (NYSE: WFC) was one of them. Here is what the fund said:

“Detractors to performance relative to the index include financial services holdings such as Wells Fargo. While banks in general have suffered due to the recession and experienced credit losses, Wells Fargo also suffered from operational missteps. It is our expectation, however, that our bank holdings in general will benefit from stronger economic growth as the pandemic recedes; and we believe Wells Fargo in particular, will, over time, lower their costs and successfully grow their businesses.”

6. Bank of America Corporation (NYSE: BAC)

Number of Hedge Fund Holders: 97

Bank of America Corporation (NYSE: BAC) is ranked sixth on our list of 15 best financial stocks to buy now. The company’s shares have offered investors returns exceeding 56% over the course of the past twelve months. The company provides banking and financial services and is headquartered in North Carolina. On July 14, the firm posted earnings for the second quarter, reporting earnings per share of $1.03, beating market predictions by $0.26. The revenue over the period was more than $21 billion, down 3% year-on-year.

On June 2, investment advisory Truist initiated coverage of Bank of America Corporation (NYSE: BAC) stock with a Buy rating and a price target of $48. Gregg Gilbert, an analyst at the firm, issued the ratings update.

At the end of the first quarter of 2021, 97 hedge funds in the database of Insider Monkey held stakes worth $45 billion in Bank of America Corporation (NYSE: BAC), down from 99 in the previous quarter worth $35 billion.

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, 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 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.”

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Disclose. None. 15 Best Financial Stocks to Buy Now is originally published on Insider Monkey.