We recently published a list of 10 High Growth Financial Stocks To Invest In. In this article, we are going to take a look at where KKR & Co. Inc. (NYSE:KKR) stands against other high growth financial stocks to invest in.
Financial Services Sector Outlook 2025
In October 2024, Deloitte released its banking and capital market outlook 2025. The report highlights that bank leaders are experiencing uncertainty about how economic conditions will evolve during the year. While inflation has decreased and interest rates are falling, concerns remain regarding sluggish economic growth, geopolitical tensions, and regulatory challenges that could affect bank performance. As per the report the US economy has outperformed expectations in 2024 with GDP growth estimated at 2.7%. However, this growth momentum is expected to slow down in 2025, with GDP growth anticipated to decelerate to 1.5% under a baseline scenario. There is potential for slightly higher growth at 1.9% if productivity increases due to technological advancements. However, a pessimistic scenario could result in growth as low as 1.0% if inflation remains high and geopolitical issues escalate.
The report highlighted that consumer spending will be tested in 2025, particularly as total consumer debt has reached an all-time high of $17.7 trillion as of mid-2024. Moreover, companies are also experiencing declining cash reserves and increasing debt maturity, which could impact their financial stability and borrowing capacity moving forward. On top of this, the Federal Reserve is also expected to implement several rate cuts in 2025, which will help alleviate some pressures on consumers but might not be enough to reduce deposit costs for banks.
As per Deloitte, the primary challenge for banks will be achieving sustainable growth amidst these economic headwinds. Executives will need to make strategic decisions regarding interest income strategies as net interest income is projected to decline due to high deposit costs. We have also covered the financial market outlook by Fidelity Investment in 7 Most Undervalued Financial Stocks To Buy According To Analysts, here’s an excerpt from the article:
According to Fidelity’s report, the prospects for the financial industry in 2025 seem promising, backed by positive economic expansion in the U.S. The Fed’s rate reduction in the second half of 2024 will improve confidence and lower credit risk. This will ultimately boost lending and deposits while reducing net interest margins.
In 2025, financial services are going to be much more advanced, driven by AI. According to IBM’s 2024 report, Generative AI is revolutionizing financial services by enhancing customer satisfaction, bringing new features in risk management, and personalized financial solutions. Deloitte’s 2025 investment management outlook projects AI and the changing digital landscape to massively impact the investment management industry in 2025.
Our Methodology
To curate the list of 10 high-growth financial stocks to invest in, we used the Finviz stock screener and Seeking Alpha. Using the screener we conducted our initial research to get an aggregated list of financial stocks that have grown their 5-year revenue by more than 20%. Next, we cross-checked the 5-year revenue growth from Seeking Alpha and ranked the stocks in ascending order of the number of hedge fund holders sourced from Insider Monkey’s third-quarter hedge funds database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern looking financial adviser sitting in front of a trading monitor, gesturing to a group of investors.
KKR & Co. Inc. (NYSE:KKR)
5-Year Revenue Growth: 42.50%
Number of Hedge Fund Holders: 66
KKR & Co. Inc. (NYSE:KKR), is a global investment company that focuses on managing various types of investments. The company offers alternative asset management, capital management, and insurance solutions. It is known for its strategic approach and has a significant presence in multiple markets worldwide.
KKR & Co. Inc. (NYSE:KKR) is strategically positioned in the rapidly expanding alternative asset management industry, which focuses on investment opportunities outside traditional stocks and bonds. It has become a leader in the Asia Pacific region, particularly in Japan which is a major economy and life insurance market. During the fiscal third quarter of 2024, the firm adjusted net income by 50% year-over-year and total operating income by 71% year-over-year, driven by an increase in fee-related income.
Montaka Global Investments in its Q4 2024 investor letter mentioned that KKR & Co. Inc. (NYSE:KKR) is strategically positioned to benefit from various tailwinds. These tailwinds include structural growth in Asian wealth, growth in global private wealth allocations, and the increasing partnerships between issues and alt managers. Here’s what the firm said about KKR & Co. Inc. (NYSE:KKR):
“With a collective US$1.7 trillion in assets under management, and with access to the best talent, capital, and deals all around the world, Blackstone and KKR & Co. Inc. (NYSE:KKR), two of Montaka’s largest holdings, are highly advantaged alternative asset managers.
They are uniquely positioned to benefit from three structural tailwinds that have commenced:
The structural growth in Asian wealth combined with increasing allocation to alts in the region;
The structural growth in US$85 trillion global private wealth allocations to alts; and
The increasing strategic partnerships between insurers and alts managers, which unlocks access to manage the US$30+ trillion assets of the insurance industry…” (Click here to read the full text)
Overall, KKR ranks 2nd on our list of high growth financial stocks to invest in. While we acknowledge the potential of KKR to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.