Below we discuss 5 best consumer finance stocks to buy now. To read our detailed analysis of the consumer finance industry and the rationale behind investing in the consumer finance sector, click to read 10 Best Consumer Finance Stocks to Buy Now.
5. OneMain Holdings Inc (NYSE: OMF)
Indiana-based OneMain Financial offers personal loans and insurance services. The stock rallied recently after Barclays gave an Overweight rating to the stock with a price target of $63. In the third quarter, OneMain Financial posted an EPS of $2.19 that surpassed analysts’ forecasts by $0.93. However, revenue in the period totaled $935 million, missing the street’s estimates by $3.42 million. A total of 33 hedge funds tracked by Insider Monkey owned positions in OneMain as of the end of the third quarter. The total worth of these investments is $470.57 million. Matthew Lindenbaum’s Basswood Capital owns 2.67 million shares of the company. Here is what Miller Value Partners said about OMF in its 2020 Q1 investor letter:
“OneMain Holding Inc. (OMF) declined 51.7% during the period as investors worried about the potential negative economic impact from the coronavirus outbreak. The company issued a report on their current business position noting that they have $4.4B in cash which they believe is sufficient to run operations under numerous stress cases through 2021 along with $6B of unencumbered collateral and $3.6B undrawn and committed conduit lines that they can draw if needed. They reiterated that they expect to maintain profitability even in a 2008/2009 type of downturn. There has been a string of insider buying with the Chairman, Jay Levine, purchasing 30k shares and the CEO, Doug Shulman, purchasing 3.25k shares and a Director, Richard Smith, buying 2k shares. In addition, the company increased their buyback program from $100M to $200M, which represents ~8% of shares outstanding. The company reported 4Q results which beat the highest estimates. The company reported adjusted EPS of $1.96 versus $1.74 expected with net charge-offs of 5.71% versus 6.30% last year. The company increased their regular quarterly dividend to $0.33 and announced a special dividend of $2.50.”
4. Synchrony Financial (NYSE: SYF)
Warren Buffett’s Berkshire Hathaway is one of the 46 hedge funds that had positions in Connecticut-based Synchrony Financial entering the fourth quarter of 2020. The fund owns $526.75 million worth of Synchrony shares as of the end of the third quarter. The company recently received a compliance assistance sandbox approval from the federal Consumer Financial Protection Bureau to develop its proposed “dual-feature” credit card. Back in 2018, PayPal agreed to sell $5.8 billion in consumer credit receivables to Synchrony Financial as a part of an expanded relationship between the two companies. In 2019, the company expanded its auto and home acceptance locations and value propositions.
3. Discover Financial Services (NYSE: DFS)
Discover Financial is an Illinois-based financial services company that also owns Discover Bank and Diners Club International. Discover stock price target was recently upgraded by Deutsche Bank $104 from $74. The firm has a Hold rating for the stock. Discover shares have gained nearly 87% over the last 6 months, which shows the sterling performance of the company even in the midst of the coronavirus crisis. Discover Financial ranks 3rd on the list of 10 best consumer finance stocks to buy now, as 47 hedge funds out of the 816 tracked by Insider Monkey had stakes in the company moving into the fourth quarter. The total value of these stakes is $112.06 million.
2. American Express Company (NYSE: AXP)
American Express is one of the biggest consumer lending and financial services company in the U.S. The company accounted for 22.9% of the total credit card transactions in the country, as of 2016. As of the end of 2019, the company had 114.4 million cards in force. In January 2021, American Express stock was upgraded by Deutsche Bank AG. The bank increased its price target for the stock to $131 from $108, with a Buy rating. Legendary investor Warren Buffett’s Berkshire Hathaway leads the group of hedge funds having stakes in the company as of the end of the third quarter. The Oracle of Omaha owns 151,610,700 shares of American Express, worth $15.2 million. Here is what our writer Tim said about Buffett's AXP position a few weeks ago:
"Berkshire owned over 151 million AXP shares at the end of September, giving it a nearly 19% ownership position in the company. Buffett emphasized the importance of safeguarding the AXP brand during discussions with CEO Stephen Squeri earlier this year in regards to the coronavirus pandemic, which prompted the company to adjust its member rewards and prioritize its customer service. AXP’s earnings have been cut in half this year, nearly doubling its P/E to 28x, but shares still trade at a solid 3.29x sales, only slightly above their five-year average."
1. Ally Financial Inc (NYSE: ALLY)
With a market cap of over $13 billion, Ally Financial is one of the biggest consumer finance companies in the U.S. The company provides car finance, online banking via a direct bank, corporate lending, vehicle insurance and mortgage loans. In the third quarter, the company posted a non-GAAP net revenue of $1.68 billion, showing a 4% growth on a year-over-year basis. Adjusted net income jumped 19% to hit $473 million, or $1.25 per share. Total deposits in the quarter rose 13%. Ally Financial tops the list of 10 best consumer finance stocks to buy now as 53 hedge funds tracked by Insider Monkey held stakes in the company. The net worth of these stakes is $1.93 billion. Please also see 10 Best Bank Stocks To Buy Now, 10 Best Value Stocks To Buy Now, and Top 10 Dividend Stocks That Pay Monthly. Follow us on Twitter: https://twitter.com/insidermonkey Disclosure: None.