15 Best Financial Stocks To Buy Now

Published on April 19, 2023 at 8:56 am by Omer Farooq in Hedge Funds, News

In this article, we will take a look at the 15 best financial stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Financial Stocks To Buy Now.

“Just Because Two Were Bad Apples, Doesn’t Make The Whole Tree Bad”

BMO Capital’s chief investment strategist, Brian Belski, appeared in an interview on TD Ameritrade Network on April 12 to discuss the financial sector and his outlook for financial stocks. Belski said that his investment strategy for the financial sector has been centered around large banks, particularly “money center banks, the Canadian banks, broker dealers, and asset managers”.

Belski noted that there are over 4000 banks in the U.S. and roughly 600 of them are publicly traded, so “just because two were bad apples, doesn’t make the whole tree bad”. Belski noted that investors’ confidence has been shook in the aftermath of the collapse of SVB, and so investors have positioned themselves in broader market ETFs. He argued that this is the market for owning individual stocks as these names will outperform as fundamentals, interest rates, and valuations return to normal levels.

Brian Belski expects large banks to outperform small and medium-sized banks over the next 3 to 5 years due to large banks having strong balance sheets, strong book values, and strong return on equity. Moreover, Belski expects increased consolidation within small and medium-sized banks. Finally, Belski thinks that small and mid-sized banks may face more strict and targeted regulatory measures because of the recent management issues that led to the collapses of SVB.

Brian Belski talked about his year-end target for the S&P 500. Belski’s base case for the S&P 500 is 4,300 and his bull case is 4,800. According to Brian Belski, the second half of 2023 is going to be led by “surprised upside earnings” in communication services, technology, consumer discretionary, and most importantly, in financials and healthcare. Belski expects large banks and asset managers to lead earnings for the second half of 2023. Brian Belski said that right now, investors should be positioned in value, growth at a reasonable price, and high quality stocks. Here are some comments from Brian Belski about how investors should position themselves for the back half of 2023:

“I think people have forgotten that the stock market is a discounting function. The market is already down 26%. Whether or not we get a recession is almost a moot point. I think people’s obsession with the recession is controlling their outlook too much. And their fear, I think that’s why you have to be kind of evenly distributed within sectors. Make big bets in the sectors that you wanna own. Tighten up your positions, don’t own a lot of stocks, own less stocks, and I think that’s how you’re gonna outperform in the second half of the year.”

Some of the top financial stocks to buy now according to elite hedge funds include Bank of America Corporation (NYSE:BAC), PayPal Holdings, Inc. (NASDAQ:PYPL), and Visa Inc. (NYSE:V). Let’s now discuss these stocks, among others, in detail below.

Photo by Austin Distel on Unsplash

Our Methodology

To determine the best financial stocks to buy now, we sifted through Insider Monkey’s database of roughly 900 elite hedge funds and identified the most popular financial stocks among institutional investors. We narrowed down our selection to the 15 financial stocks that were the most widely held by hedge funds and ranked them in ascending order of the number of hedge funds that have stakes in them. We have also included the analyst ratings and top shareholders along with each of our picks.

Best Financial Stocks To Buy Now

15. Fiserv, Inc. (NASDAQ:FISV)

Number of Hedge Fund Holders: 65

On April 11, Barclays analyst Ramsey El-Assal raised his price target on Fiserv, Inc. (NASDAQ:FISV) to $150 from $140 and maintained an Overweight rating on the shares.

Fiserv, Inc. (NASDAQ:FISV) is one of the best financial stocks to buy now according to hedge funds. As of April 14, the stock has returned 18.71% to investors over the past 6 months.

At the end of the fourth quarter of 2022, 65 hedge funds were long Fiserv, Inc. (NASDAQ:FISV) and disclosed stakes worth $4.3 billion in the company. Of those, Harris Associates was the leading shareholder and held a stake worth $1.9 billion.

Renaissance Investment Management made the following comment about Fiserv, Inc. (NASDAQ:FISV) in its Q4 2022 investor letter:

“We made one change to the portfolio in the fourth quarter, adding a new position in the Information Technology sector with Fiserv, Inc. (NASDAQ:FISV), a leading financial services technology company that facilitates the movement of money, helping to run the financial operations of banks and merchants. The company enjoys a leading market position in a rational oligopoly in which the top three companies control 70% of the entire market. We also like the company’s strategy of being a “one-stop-shop” for banks and merchants, resulting in a large financial platform that has the operating scale to outcompete smaller rivals and a recurring revenue model that is highly attractive in uncertain macroeconomic environments.”

14. Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 70

At the close of the fourth quarter of 2022, 70 hedge funds were eager on Block, Inc. (NYSE:SQ) and held positions worth $4.2 billion in the company. Of those, ARK Investment Management was the largest stockholder in the company and disclosed a stake worth $565 million.

On February 23, Block, Inc. (NYSE:SQ) announced earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $0.22 and generated a revenue of $4.65 billion, up 14% year over year and ahead of Wall Street estimates by $56.71 million. As of April 14, the stock has gained 14.52% over the past 6 months.

This April, Baird reiterated an Outperform rating and its $92 price target on Block, Inc. (NYSE:SQ). The stock is placed fourteenth on our list of the best financial stocks to buy according to hedge funds.

Some of analysts’ and hedge funds’ top picks from the financials sector include Bank of America Corporation (NYSE:BAC), PayPal Holdings, Inc. (NASDAQ:PYPL), and Visa Inc. (NYSE:V).

13. The Progressive Corporation (NYSE:PGR)

Number of Hedge Fund Holders: 71

On April 13, The Progressive Corporation (NYSE:PGR) released earnings for the first quarter of fiscal 2023. The company’s EPS for the quarter was $0.66. The Progressive Corporation (NYSE:PGR) generated a revenue of $16.11 billion, up 22.22% year over year and ahead of market consensus by $97 million.

The Progressive Corporation (NYSE:PGR) is one of the best financial stocks to buy now. As of April 14, the stock has appreciated by 23.91% over the past 12 months.

This April, BofA analyst Joshua Shanker raised his price target on The Progressive Corporation (NYSE:PGR) to $188 from $178 and reiterated a Buy rating on the shares.

71 hedge funds disclosed having stakes in The Progressive Corporation (NYSE:PGR) at the close of Q4 2022. The total value of these stakes amounted to $2.3 billion. As of December 31, Orbis Investment Management is the top shareholder in the company and has a position worth $455 million.

Giverny Capital made the following comment about The Progressive Corporation (NYSE:PGR) in its Q4 2022 investor letter:

“At the top of our performance list, The Progressive Corporation (NYSE:PGR) rose 26% for the year as it generated outstanding results relative to other large auto insurers. Markel and Berkshire Hathaway rose modestly. The three companies compete in diverse lines of insurance, but they all benefit from rising rates for property coverage after an extended period of weather catastrophes, rising jury awards in lawsuits and inflated loss costs. Our insurers tend to be careful underwriters, so their profitability rises with rates. Our insurers also benefit from rising interest rates because they tend to invest premiums paid by customers into fixed income securities until they pay claims.

Our largest holding at year-end was Progressive, ascending to the top spot thanks to 26% appreciation in a year when most of our holdings lost value.

The auto insurance industry is in turmoil, with most companies losing money as soaring used car prices drive up the cost of accident repairs and replacements. It is hard to overstate Progressive’s superiority to its peer group. It is the most sophisticated underwriter in the country, and it began raising insurance premiums earlier than its peers did as driving patterns and repair costs worsened in 2021. It did other smart things, too, including reducing advertising and sales efforts in markets where it could not get rate increases – thus choosing where it would compete hardest for customers – and not renewing the policies of high-risk drivers. This may seem elementary, but most other major insurers did the opposite: they used the windfall profits earned during pandemic quarantine to ratchet up their marketing efforts to attract new customers. They cut rates to try to grow faster…” (Click here to read the full text)

12. American Express Company (NYSE:AXP)

Number of Hedge Fund Holders: 71

American Express Company (NYSE:AXP) is on the rise. As of April 14, the stock has gained 10.94% and is trading at a TTM PE multiple of 16x.

On April 4, Oppenheimer revised its price target on American Express Company (NYSE:AXP) to $180 from $182 and maintained an Outperform rating on the shares. The stock is placed twelfth among the best financial stocks to buy now.

At the end of Q4 2022, 71 hedge funds were long American Express Company (NYSE:AXP) and held collective stakes worth $26.8 billion. Of those, Berkshire Hathaway was the most prominent investor in the company and disclosed a position worth $22 billion.

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

Number of Hedge Fund Holders: 74

Goldman Sachs Group, Inc. (NYSE:GS) was spotted on 74 hedge funds’ portfolios at the close of Q4 2022. These funds held collective positions worth $4.8 billion in the company. As of December 31, Eagle Capital Management is the top stockholder in the company and holds a stake worth $1.12 billion.

As of April 14, Goldman Sachs Group, Inc. (NYSE:GS) has returned 9.85% to investors over the past 6 months and is trading at a PE ratio of 11x. The stock is one of the best financial stocks to buy now according to hedge funds.

On April 10, JMP Securities updated its price target on Goldman Sachs Group, Inc. (NYSE:GS) to $460 from $470 and maintained an Outperform rating on the shares.

10. The Charles Schwab Corporation (NYSE:SCHW)

Number of Hedge Fund Holders: 74

This April, Barclays updated its price target on The Charles Schwab Corporation (NYSE:SCHW) to $56 from $61 and reiterated an Equal Weight rating on the shares. The stock is placed tenth on our list of the best financial stocks to buy now according to hedge funds.

The Charles Schwab Corporation (NYSE:SCHW) is trading at an attractive PE multiple and is also offering dividends. As of April 14, the stock is trading at a PE ratio of 14x and is offering a forward dividend yield of 1.97%.

At the close of the fourth quarter of 2022, 74 hedge funds were bullish on The Charles Schwab Corporation (NYSE:SCHW) and disclosed positions worth $8.1 billion in the company. Of those, GQG Partners was the largest shareholder in the company and held a position worth $1.4 billion.

LVS Advisory made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2023 investor letter:

“We exited The Charles Schwab Corporation (NYSE:SCHW) during the week leading up to the Silicon Valley Bank failure at a price in the high $60s. I sent an ad hoc note to partners on March 11 discussing our decision to sell the stock but I will add some additional context here. We invested in Charles Schwab during the summer of 2022 (discussed in our Q3 2022 letter) shortly after making our investment in Interactive Brokers. While Interactive Brokers is focused on faster-growing international markets and more sophisticated traders, Charles Schwab is a more mature US business focused on retirement accounts and wealth managers. Our investment thesis was that Schwab would benefit from higher interest rates and after years of investment would begin returning a significant amount of capital to shareholders.

My view changed when it became clear that liquidity would become a greater issue for all banks in early March. We believe Schwab has enough liquidity to operate its business, but we no longer believe the company is in a position to return capital. Furthermore, Schwab saw a higher degree of deposit flight in Q4 than we expected leading us to believe the problem could get worse before it gets better. Schwab may even need to raise additional equity capital to reassure the market of its liquidity position which would drastically change the risk/reward calculation of investing in the stock. While we realized a ~6% loss on our investment, our ability to quickly recalibrate our views during the early stages of the March banking crisis prevented us from losing an additional 20%+ if we had held on until today.”

9. Citigroup Inc. (NYSE:C)

Number of Hedge Fund Holders: 81

On April 14, Citigroup Inc. (NYSE:C) announced earnings for FQ1 2023. The company reported an EPS of $2.19 and outperformed EPS expectations by $0.50. The company generated a revenue of $21.45 billion, up 11.78% year over year and ahead of Wall Street consensus by $1.39 billion.

On March 24, RBC Capital revised its price target on Citigroup Inc. (NYSE:C) to $51 from $55 and maintained an Outperform rating on the shares. As of April 14, the stock has gained 8.26% year to date and is offering a forward dividend yield of 4.12%. Citigroup Inc. (NYSE:C) is one of the best financial stocks to buy now.

Citigroup Inc. (NYSE:C) was held by 81 hedge funds at the end of Q4 2022. These funds disclosed collective positions worth $7.4 billion in the company. As of December 31, Berkshire Hathaway is the leading investor in the company and has a stake worth $2.49 billion.

8. Wells Fargo & Company (NYSE:WFC)

Number of Hedge Fund Holders: 87

87 hedge funds disclosed having stakes in Wells Fargo & Company (NYSE:WFC) at the close of Q4 2022. The total value of these stakes amounted to $5.5 billion. As of December 31, Eagle Capital Management is the most prominent shareholder in the company and has a position worth $1.1 billion.

Wall Street is bullish on Wells Fargo & Company (NYSE:WFC). On April 14, Goldman Sachs analyst Richard Ramsden raised his price target on Wells Fargo & Company (NYSE:WFC) to $49 from $46 and maintained a Buy rating on the shares. The stock is one of the best financial stocks to buy now.

Davis Advisors made the following comment about Wells Fargo & Company (NYSE:WFC) in its 2022 annual investor letter:

“Our investment thesis for our next largest bank investment, Wells Fargo, is totally different. As is well known, Wells Fargo & Company (NYSE:WFC) is the country’s third-largest bank, serving one in three U.S. households. Years of regulatory missteps under prior managements resulted in reputational damage, higher-than-average expenses, numerous consent orders, caps on asset growth, all added to the negative impact of low rates on their interest income. However, where others see bad news, we see resiliency and gradual improvement. Wells Fargo’s resiliency is reflected in the fact that despite years of terrible headlines and congressional hearings, Wells Fargo’s core customers stayed put and customer attrition remains extraordinarily low.

As to gradual improvement, new management has made steady headway in closing consent orders, settling regulatory matters and upgrading systems. Thus, rather than increasing profits from growth, Wells Fargo’s earnings growth for the next three-to-five years should come from the combined tailwinds of rising interest income, partially offset by normalizing credit costs, reduced expenses as systems improve and the scandals of the last decade are gradually put behind them, and the return of excess capital through share repurchases and rising dividends. The hypothetical earnings bridge displayed in Figure 6 gives some sense of the earnings power we see unfolding in the years ahead for this durable financial franchise.

While our grounded optimism carries the day, we are mindful of the risk that Wells Fargo’s historically excellent credit culture may have deteriorated, or that exasperated regulators may choose to extract even more major penalties for past infractions.”

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

Number of Hedge Fund Holders: 97

Shares of S&P Global Inc. (NYSE:SPGI) have appreciated by 16.97% over the past 6 months, as of April 14, and the stock is offering a forward dividend yield of 1.03%. S&P Global Inc. (NYSE:SPGI) is placed seventh among the best financial stocks to buy now.

On February 10, Baird analyst Jeffrey Meuler raised his price target on S&P Global Inc. (NYSE:SPGI) to $401 from $393 and maintained an Outperform rating on the shares.

At the end of the fourth quarter of 2022, 97 hedge funds were long S&P Global Inc. (NYSE:SPGI) and disclosed stakes worth $7.8 billion in the company. Of those, TCI Fund Management was the leading shareholder in the company and held a position worth $3 billion.

Baron Funds made the following comment about S&P Global Inc. (NYSE:SPGI) in its Q4 2022 investor letter:

“Shares of rating agency and data provider S&P Global Inc. (NYSE:SPGI) increased 10.1% during the quarter as investors looked past weak debt issuance activity and anticipated a potential issuance rebound in 2023. Equity markets rose during the quarter, offering some reprieve to asset-based revenue headwinds. The company also hosted an Investor Day during which management provided medium-term financial guidance of 7% to 9% annual revenue growth and low to mid-teens annual EPS growth. We continue to own the stock due to the company’s durable growth characteristics that are underpinned by the secular trends of increasing bond issuance, growth in passive investing, and demand for data and analytics, while also benefiting from significant competitive advantages.”

6. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 100

Wall Street is bullish on JPMorgan Chase & Co. (NYSE:JPM). This April, Goldman Sachs raised its price target on JPMorgan Chase & Co. (NYSE:JPM) to $172 from $160 and reiterated a Buy rating on the shares. JPMorgan Chase & Co. (NYSE:JPM) ranks high among the best financial stocks to buy according to hedge funds.

On April 14, JPMorgan Chase & Co. (NYSE:JPM) announced earnings for FQ1 2023. The company reported an EPS of $4.10 and outperformed EPS expectations by $0.73. As of April 14, the stock has gained 19.74% over the past 6 months.

At the end of Q4 2022, 100 hedge funds were bullish JPMorgan Chase & Co. (NYSE:JPM) and held positions worth $5.1 billion in the company. Of those, Greenhaven Associates was the largest investor in the company and disclosed a stake worth $643 million.

In addition to JPMorgan Chase & Co. (NYSE:JPM), other financial stocks hedge funds and analysts are bullish on include Bank of America Corporation (NYSE:BAC), PayPal Holdings, Inc. (NASDAQ:PYPL), and Visa Inc. (NYSE:V).

Click to continue reading and see 5 Best Financial Stocks To Buy Now.

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Published on May 1, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

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