In this article we will be taking a look at the 16 best financial stocks to buy according to hedge funds. To skip our detailed analysis of the financial sector, you can go directly to see 5 Best Financial Stocks To Buy According to Hedge Funds.
A Fed Pivot And What It Means For Big Banks
The financial sector went through a good amount of volatility last year, and many are now beginning to wonder whether the volatility will continue in 2024. No one can fully predict the likelihood of this happening, and yet for some, it may not be an unlikely development. However, this January, CEOs from major big banks made statements highlighting their hopes for the financial sector in 2024, particularly for big banks, in the event of a Federal Reserve “pivot” on their interest rate hikes.
On January 20, CNBC’s “Power Lunch” highlighted some statements made by several big bank CEOs on this matter. Goldman Sachs Group, Inc.’s (NYSE:GS) CEO, David Solomon, made the following comments:
“It’s hard for me to see the market’s view of seven cuts this year. I do think there’s a reasonable possibility of some interest rate cuts and some easing. But it’s really gonna be dependent on what the data says and how the economy transmits through the year.”
Morgan Stanley’s (NYSE:MS) CEO, Ted Pick, also made a few comments on the subject:
“I do think we are probably past peak inflation. What’s interesting though is that it is not inconceivable that we have to go faster, i.e., 50 basis points, if you sort of price that as 5% or 10%.”
Banks Gaining Confidence in Loaning
Huntington Bancshares CEO, Steve Steinour, joined CNBC’s “Power Lunch” on January 20 to discuss the above as well. On the impact of rate cuts on the financial sector, Steinour made the following comments:
“If it’s three or four cuts, it’s helpful. If it’s six or seven, that might imply a soft economy and that would not be helpful to us or anyone else. But we model it both ways, and in either direction, we’ve got a very tight net interest margin – part of that through hedging.”
These observations brought Steinour to several conclusions, the most important one being that in the light of a Fed pivot, big banks will gain confidence in loaning to the general public. Generally speaking, Steinour believes that business is good in the banking sector so far this year. He noted that on multiple indicator fronts, including housing prices, things are continuing to look good, the consumer is still seen to be reasonably strong, and businesses are continuing to have a good year. The Federal Reserve’s rate pivot in this atmosphere is thus considered to be helpful.
Considering these observations, investors in the financial sector can expect financial stocks, including big bank stocks, to have a strong start to the year. As such, we have compiled a list of some of the best financial stocks to buy now. These include renowned banking companies such as Wells Fargo & Company (NYSE:WFC), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), alongside asset management companies, financial risk assessment companies, and more. Our list thus includes some of the best financial stocks to invest in for the long term and some of the best financial stocks to buy in 2024.
A series of ATMs in a row, symbolizing the company’s 24/7 banking services.
Our Methodology
We selected the stocks for our list of the best financial stocks to buy by consulting Insider Monkey’s hedge fund data for the fourth quarter of 2023. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Best Financial Stocks To Buy According to Hedge Funds
16. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 48
BlackRock, Inc. (NYSE:BLK) is an asset management and custody banks company based in New York. It operates as an investment manager offering services to institutional, intermediary, and individual investors.
On January 16, Bill Katz at TD Cowen upgraded BlackRock, Inc. (NYSE:BLK) from Market Perform to Outperform and announced a $938 price target on the stock.
BlackRock, Inc. (NYSE:BLK) was seen in the 13F holdings of 48 hedge funds in the fourth quarter, with a total stake value of $2.9 billion.
The London Company mentioned BlackRock, Inc. (NYSE:BLK) in its fourth-quarter 2023 investor letter:
“BlackRock, Inc. (NYSE:BLK) – BLK rallied in 4Q after underperforming earlier in the year. BLK performance from quarter to quarter is often a function of market performance, which drives the company’s assets under management. Our conviction in BLK remains high, based on the company’s durable competitive position.”
Like Goldman Sachs Group, Inc. (NYSE: GS), Morgan Stanley (NYSE:MS), and Wells Fargo & Company (NYSE:WFC), BlackRock, Inc. (NYSE:BLK) is among the best financial stocks to invest in today.
15. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 56
We saw 56 hedge funds long Moody’s Corporation (NYSE:MCO) in the fourth quarter, with a total stake value of $19.1 billion.
Moody’s Corporation (NYSE:MCO) is a financial exchanges and data company based in New York. It offers financial risk assessment services worldwide.
Jeffrey Silber at BMO Capital maintains an Outperform rating and a $430 price target on Moody’s Corporation (NYSE:MCO) as of January 3.
This is what L1 Capital said about Moody’s Corporation (NYSE:MCO) in its third-quarter 2023 investor letter:
“Portfolio adjustments during the September 2023 quarter were modest, diversified, but meaningful. In total around 10% of the Fund was divested and reinvested into opportunities we consider provide a superior risk-adjusted base case return.
We continued to trim our investment in high-quality technology businesses such as Intuit, mentioned previously. These adjustments were purely for valuation considerations, rather than any business concerns and some of these companies remain significant portfolio holdings.
The Fund’s remaining investment in Moody’s Corporation (NYSE:MCO)’s was fully divested during the September quarter. Moody’s is the world’s leading credit rating, risk assessment and analytics business. The core credit ratings business is largely a duopoly with S&P Global, with modest competition from Fitch Ratings and regional competitors – a great example of our preferred ‘Noah’s Ark’ industry structure.
The share price of Moody’s has been volatile over recent times, often reacting too greatly to changes in short-term capital markets conditions. During the quarter we took advantage of positive market sentiment to divest our holding at a share price we considered to be above fair value. Moody’s is very well managed and ‘ticks all our boxes’ for one of the world’s highest-quality businesses. The company has moved from our Portfolio to our Bench of potential investments. Having a Bench of ‘ready to go’ investment opportunities is a core aspect of our investment process. We continue to analyse Moody’s as if we owned it and are excited by the pull-back in the share price from recent highs.”
14. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 56
Fisher Asset Management was the most prominent shareholder in Morgan Stanley (NYSE:MS) at the end of the fourth quarter, holding 20.3 million shares in the company.
Oppenheimer’s Chris Kotowski maintains an Outperform rating and a $109 price target on Morgan Stanley (NYSE:MS) as of January 30.
A total of 56 hedge funds were long Morgan Stanley (NYSE:MS) in the fourth quarter, with a total stake value of $2.7 billion.
Morgan Stanley (NYSE:MS) is an investment banking and brokerage company. It offers financial products, wealth management services, and investment management services, among more, and is one of the best financial stocks to buy today.
13. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 64
American Express Company (NYSE:AXP) is a consumer finance company based in New York. It offers credit cards, charge cards, banking, and other payment and financing products and services, among more.
On January 29, Dominick Gabriele at Oppenheimer maintained an Outperform rating and a $219 price target on American Express Company (NYSE:AXP).
American Express Company (NYSE:AXP) had 64 hedge funds long its stock in the fourth quarter. Their total stake value was $31.8 billion.
This is what Oakmark Funds said about American Express Company (NYSE:AXP) in its fourth-quarter 2023 investor letter:
“American Express Company (NYSE:AXP) is one of the largest credit card issuers and payment networks in the world. We believe the company’s closed-loop network, brand equity and scale represent durable competitive advantages. Unlike most card issuers that process credit card transactions over third-party networks, American Express processes transactions over its own network. This allows American Express to earn greater economics than peers on each card transaction. The company retains part of this advantage in the form of higher profitability and reinvests the rest in enhanced customer rewards and service. Over time, these investments have helped American Express build its brand and attract more lucrative, high-spending card customers. We expect this business model and customer-centric approach will continue to drive industry-leading growth for years to come. Concerns over the near-term economic outlook allowed us to purchase shares of American Express at a 13x P/E on next year’s consensus earnings estimate. We think that is an attractive valuation for a company with this combination of business quality and growth.”
12. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Holders: 66
A Buy rating was maintained on Fidelity National Information Services, Inc. (NYSE:FIS) on January 18 by Dan Dolev at Mizuho, alongside a $73 price target.
Fidelity National Information Services, Inc. (NYSE:FIS) is a transaction and payment processing services company based in Jacksonville, Florida. It provides technology solutions for financial institutions and businesses.
There were 66 hedge funds long Fidelity National Information Services, Inc. (NYSE:FIS) in the fourth quarter, with a total stake value of $3.2 billion.
Here’s what Weitz Investment Management said about Fidelity National Information Services, Inc. (NYSE:FIS) in its fourth-quarter 2023 investor letter:
“Charles Schwab Corporation (SCHW) (sold in the first quarter) and Fidelity National Information Services, Inc. (NYSE:FIS) were the Fund’s primary annual detractors. FIS has been a rare “triple-crown” loser (2021, 2022, and 2023). At the risk of sounding like a broken record, we think the stock’s setup is much improved from today’s rebased price levels.”
11. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 69
Goldman Sachs Group, Inc. (NYSE:GS) is another investment banking and brokerage company on our list of the best financial stocks to buy. It offers asset and wealth management services, financial advisory services, and strategic advisory services, among more.
Our hedge fund data for the fourth quarter shows 69 hedge funds long Goldman Sachs Group, Inc. (NYSE:GS), with a total stake value of $6.3 billion.
As of January 30, Chris Kotowski at Oppenheimer maintains an Outperform rating and a $506 price target on Goldman Sachs Group, Inc. (NYSE:GS).
Ariel Investments said the following about Goldman Sachs Group, Inc. (NYSE:GS) in its third-quarter 2023 investor letter:
“Additionally, global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), increased in the period. Although the company posted mixed earnings results and lowered full-year guidance, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and an enhanced focus on driving profitability in Platform Solutions. GS also noted signs of a recovery in a few investment banking areas, including equity capital markets and mergers & acquisitions. With the stock currently trading near book value, management also announced intentions to return more capital to shareholders via buybacks. Looking ahead, we view the near and long-term outlook for Goldman as attractive at current levels, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
10. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 72
Holding 23.2 million shares in the company, Harris Associates was the most prominent shareholder in Wells Fargo & Company (NYSE:WFC) at the end of the fourth quarter.
Wells Fargo & Company (NYSE:WFC) is a diversified banking company based in San Francisco, California. It offers banking, investment, mortgage, and consumer and commercial finance products and services and is one of the best financial stocks to buy today.
Morgan Stanley’s Betsy Graseck maintains an Overweight rating and a $63 price target on Wells Fargo & Company (NYSE:WFC) as of January 30.
Wells Fargo & Company (NYSE:WFC) was seen in the portfolios of 72 hedge funds in the fourth quarter, with a total stake value of $5.5 billion.
9. Apollo Global Management, Inc. (NYSE:APO)
Number of Hedge Fund Holders: 77
There were 77 hedge funds long Apollo Global Management, Inc. (NYSE:APO) in the fourth quarter. Their total stake value was $4.8 billion.
Apollo Global Management, Inc. (NYSE:APO) is a diversified financial services company based in New York. It specializes in investments in credit, private equity, and real estate markets.
A Buy rating and a $125 price target were maintained on Apollo Global Management, Inc. (NYSE:APO) on February 13 by William Katz at Citigroup.
Ave Maria mentioned Apollo Global Management, Inc. (NYSE:APO) in its third-quarter 2023 investor letter:
“Apollo Global Management, Inc. (NYSE:APO) was added to the Fund this quarter. Historically, Apollo has excelled in traditional leveraged buyout and leveraged loan markets, establishing itself as a premier buyout firm. In 2009, Apollo launched Athene, a retirement services provider specializing in fixed-rate annuities. Athene quickly ascended to become the leading fixed-rate annuity provider in the US, providing Apollo with nearly a half a trillion dollars of perpetual capital to invest. Apollo predominantly invests this capital in investment-grade private credit, sourcing investment opportunities through 16 origination platforms. These platforms deploy capital into aircraft financing, fleet financing, senior debt, non-agency home loans, and other assets. The investment grade credit market is vast – estimated at $40 trillion. By leveraging Athene’s liability origination capabilities and the asset origination capabilities of Apollo’s various platforms, Apollo is poised to grow to over $1 trillion in AUM over the next five years.
We are confident that these three alternative investment managers will grow their respective businesses substantially over the next five years. This should provide ample growth in their stock prices and, consequently, the Fund’s positions in them.”
8. S&P Global Inc. (NYSE:SPGI)
Number of Hedge Fund Holders: 82
TCI Fund Management was the largest shareholder in S&P Global Inc. (NYSE:SPGI) at the end of the fourth quarter, holding over 9 million shares in the company.
S&P Global Inc. (NYSE:SPGI) is a financial exchanges and data company based in New York. It provides credit ratings, benchmarks, analytics, and workflow solutions in the global capital, commodity, and automotive markets.
An Outperform rating and a $500 price target were reiterated on S&P Global Inc. (NYSE:SPGI) on February 12 by Ashish Sabadra at RBC Capital.
S&P Global Inc. (NYSE:SPGI) had 82 hedge funds long its stock in the fourth quarter, with a total stake value of $8.9 billion.
7. Paypal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 87
Paypal Holdings, Inc. (NASDAQ:PYPL) is another transaction and payment processing services company on our list of the best financial stocks to buy. It operates a technology platform enabling digital payments on behalf of merchants and consumers.
We saw 87 hedge funds long Paypal Holdings, Inc. (NASDAQ:PYPL) in the fourth quarter, with a total stake value of $2.3 billion.
Tien-Tsin Huang at JP Morgan holds an Overweight rating and a $70 price target on Paypal Holdings, Inc. (NASDAQ:PYPL) as of February 8.
Wedgewood Partners mentioned Paypal Holdings, Inc. (NASDAQ:PYPL) in its fourth-quarter 2023 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL) also contributed less to portfolio performance than most holdings during the fourth quarter. The total payment volume handled by PayPal during its most recent quarter grew +15%, which helped drive healthy revenue growth and +20% earnings per share growth. Critically, the Company’s new management team has significant opportunity to drive more revenue and earnings growth across the massive, multi-trillion-dollar payments addressable market. PayPal’s rapidly growing payment processing brand, Braintree, represents one of those revenue growth opportunities, either by raising prices, as the Company had previously used a low-price strategy to establish a beachhead in this market, or by adding value-added services. PayPal’s branded checkout remains the largest volume and profit driver for the business, and we expect this to continue to track in-line with e-commerce growth in the near term, and eventually take share as the Company rolls out new features to its over +400 million users and +30 million merchants. We added to our position with the stock trading at just 10X forward earnings estimates during the quarter because there are many more long-term growth opportunities relative to most financial companies that trade for similar multiples and compared to technology companies that trade for much higher multiples.”
6. Citigroup. Inc (NYSE:C)
Number of Hedge Fund Holders: 87
Citigroup Inc. (NYSE:C) is a diversified banking company based in New York. It offers wholesale banking products and services, personal banking and wealth management services, and cash management services, among more.
Chris Kotowski at Oppenheimer maintains an Outperform rating and a $95 price target on Citigroup Inc. (NYSE:C) as of January 30.
A total of 87 hedge funds were long Citigroup Inc. (NYSE:C) in the fourth quarter, with a total stake value of $10.3 billion.
Here’s what Patient Capital Management said about Citigroup Inc. (NYSE:C) in its fourth-quarter 2023 investor letter:
“Citigroup Inc. (NYSE:C), run by Jane Fraser since 2021, is on a multi-year journey to reorganize the business and reach return on tangible common equity of 11-12% by 2025-2026 (and higher further out). Citigroup is finally taking the hard actions necessary, cutting unprofitable departments, taking out middle management layers, and reducing overall headcount. We have high confidence Citi will hit its targets.”
Like Goldman Sachs Group, Inc. (NYSE: GS), Morgan Stanley (NYSE:MS), and Wells Fargo & Company (NYSE:WFC), Citigroup Inc. (NYSE:C) is among the best financial stocks to buy now.
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Disclosure: None. 16 Best Financial Stocks To Buy According to Hedge Funds is originally published on Insider Monkey.