In this article, we will take a look at the top 10 financial stocks today.
The financial services sector of the economy has seen massive changes in the past few years as technology-led disruption acts as both a creative and destructive force within the industry. The global finance market is expected to grow from $20 trillion in 2020 to $22 trillion in 2021 at a compound annual growth rate of close to 10%. Some of the catalysts for this growth are fintech firms, blockchain-based currencies, and the rise of the sharing economy. However, these change-makers are also fueling the demise of traditional finance institutions.
According to research by London-based professional services firm PwC, 63% of insurance executives believe that the Internet of Things universe (IoT) will soon become strategically important to their business. There is also a growing unease within the banking industry that risks losing close to a quarter of business dealings to fintech firms within the next five years. The dramatic rise of blockchain over the past few years has also left industry experts baffled and most financial services firms are still not fully prepared to integrate it into the economy.
For example, Berkshire Hathaway Inc. (NYSE: BRK-A), one of the largest holding companies in the world, has repeatedly dismissed calls for investment in blockchain stocks. At a meeting held recently, Charlie Munger, a senior figure at Berkshire Hathaway Inc. (NYSE: BRK-A), told shareholders that cryptocurrencies were disgusting and an affront to civilization. However, his firm has continued to register impressive returns despite not jumping on the bandwagon that has minted several millionaires and billionaires over the last few years. BRK-A is among the top financial stocks today.
It also seems that larger changes are afoot in the finance world where retail investors are increasingly more important to the overall market dynamics with the rise of trading apps like Robinhood. The recent initial public offering of Coinbase Global, Inc. (NASDAQ: COIN) is a case in point. Despite muted interest from big finance institutions, Coinbase Global, Inc. (NASDAQ: COIN) was valued at over $86 billion on the first day of trading. Although the share price has fallen since, the firm still has a lot of room to run because of a strong business model.
Another interesting stock to watch to observe the changes in the finance industry is Visa Inc. (NYSE: V), a firm that facilitates electronic money transfers. Visa Inc. (NYSE: V) has registered impressive numbers during the pandemic, and on March 29 announced that it would allow the use of cryptocurrencies to settle transactions on its payments network. Bitcoin, the most popular cryptocurrency, soared as much as 5% after the announcement. The endorsement from Visa Inc. (NYSE: V) is a big step for crypto as it fights for recognition in mainstream financial services. Major banks like Bank of America Corporation (NYSE: BAC) are also moving towards accepting crypto as a valid asset class.
Other parts of the finance world also have some catching up to do. 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 February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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.
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With this context in mind, here is our list of the top 10 financial stocks today.
Top Financial Stocks Today
10. Square, Inc. (NYSE: SQ)
Number of Hedge Fund Holders: 89
Square, Inc. (NYSE: SQ) is a California-based digital payments firm founded in 2009. It is placed tenth on our list of top 10 financial stocks today. Square, Inc. (NYSE: SQ) has pioneered digital payments for the best part of the last decade and the COVID-19 pandemic has helped the company reach new highs. Square stock has offered investors returns exceeding 191% in the past twelve months as digital payments increase dramatically due to the coronavirus lockdowns. Some of the products the firm markets include bank card readers and point of sale devices. Square is one of the top financial stocks today as the company is disrupting the financial markets with innovative technology and has a lot of room to run.
On May 6, Square, Inc. (NYSE: SQ) posted earnings results for the first quarter of 2021, reporting a revenue of more than $5 billion, a 266% year-on-year increase, beating market predictions by $1.7 billion. The earnings per share were $0.41.
At the end of the fourth quarter of 2020, 89 hedge funds in the database of Insider Monkey held stakes worth $8.8 billion in the firm, up from 73 the preceding quarter worth $6.5 billion.
In its Q1 2021 investor letter, RiverPark Funds, an investment management firm, highlighted a few stocks and Square, Inc. (NYSE: SQ) was one of them.
“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.”
9. The Goldman Sachs Group, Inc. (NYSE: GS)
Number of Hedge Fund Holders: 76
The Goldman Sachs Group, Inc. (NYSE: GS) is a New York-based financial services company. It was founded in 1869 and is placed ninth on our list of top 10 financial stocks today. Some of the services offered by the group include investment management, securities, asset management, prime brokerage, and securities underwriting. The Goldman Sachs Group, Inc. (NYSE: GS) stock has returned more than 100% to investors in the past twelve months. The group employs more than 40,000 people and has a market cap of over $130 billion.
On May 7, American news media reported that The Goldman Sachs Group, Inc. (NYSE: GS) had set up a cryptocurrency trading desk and started dealing in two crypto derivatives. The desk is part of the emerging markets division of the firm.
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 5.2 million shares worth more than $1.3 billion.
8. Morgan Stanley (NYSE: MS)
Number of Hedge Fund Holders: 66
Morgan Stanley (NYSE: MS) is a New York-based investment bank founded in 1931. It is placed eighth on our list of top 10 financial stocks today. Morgan Stanley stock has returned more than 121% to investors in the past year. The bank has operations in the Americas, Europe, the Middle East, and Africa. Some of the financial services the bank offers include institutional securities, wealth management, and investment management. The bank has more than 71,000 employees and a market cap of over $163 billion.
Morgan Stanley (NYSE: MS) is one of the best options on the market when it comes to dividends. On April 16, the bank declared a quarterly dividend of $0.35 per share, in line with previous. It has recently also announced dealings in cryptocurrencies. Like Bank of America Corporation (NYSE: BAC), MS is one of the best financial stocks to buy now.
At the end of the fourth quarter of 2020, 66 hedge funds in the database of Insider Monkey held stakes worth $5.6 billion in the firm, down from 70 in the preceding quarter worth $4.1 billion.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, a high value-added investment management firm, highlighted a few stocks and Morgan Stanley (NYSE: MS) was one of them.
“Top three contributor Morgan Stanley (NYSE: MS), 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.”
7. China Life Insurance Company Limited (NYSE: LFC)
Number of Hedge Fund Holders: 5
China Life Insurance Company Limited (NYSE: LFC) is a Beijing-based insurance company founded in 1949. It is ranked seventh on our list of top 10 financial stocks today. It is one of the largest insurance firms in the world with a market cap of over $119 billion. The firm offers life, health, accidental, and business insurance policies. China Life Insurance Company Limited (NYSE: LFC) also markets investment management services.
Like Bank of America Corporation (NYSE: BAC), Coinbase Global, Inc. (NASDAQ: COIN) and Berkshire Hathaway Inc. (NYSE: BRK-A), LFC is one of the best financial stocks to buy now.
China Life Insurance Company Limited (NYSE: LFC) posted fiscal year earnings on March 25, reporting a net income of RMB50 billion and a revenue of RMB804 billion. The revenue number was a more than 10% increase compared to the revenue in the previous fiscal year.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in the firm with 871,006 shares worth more than $9.6 million.
6. Bank of America Corporation (NYSE: BAC)
Number of Hedge Fund Holders: 99
Bank of America Corporation (NYSE: BAC) is a North Carolina-based investment bank and financial services firm. It was founded in 1784 and is placed sixth on our list of top 10 financial stocks today. Bank of America Corporation (NYSE: BAC) offers consumer banking, wealth management, and market research services. It serves more than 66 million clients and has more than 4,300 branches spread across the United States. Bank of America Corporation (NYSE: BAC) stock has returned more than 90% to investors over the past twelve months.
On May 4, investment advisory Baird downgraded Bank of America Corporation (NYSE: BAC) stock to Neutral from Buy citing positive outlook for the firm already baked into the current valuations. The share price of the bank’s stock slipped close to 0.6% after the update. Still, Bank of America Corporation (NYSE: BAC) is one of the top financial stocks today.
At the end of the fourth quarter of 2020, 99 hedge funds in the database of Insider Monkey held stakes worth $35 billion in the firm, up from 88 in the previous quarter worth $26 billion.
5. Coinbase Global, Inc. (NASDAQ: COIN)
Number of Hedge Fund Holders: N/A
Coinbase Global, Inc. (NASDAQ: COIN) is a Delaware-based cryptocurrency exchange firm. It is ranked fifth on our list of top 10 financial stocks today and was founded in 2012. Coinbase lets users deal in popular crypto currencies like Bitcoin and Ethereum, as well as others. The exchange went public last month at a blockbuster initial public offering, but share price has fallen over the past few days as retail investors looking to turn a quick profit on their investments abandon the ship. However, the core business of the firm bodes well for future growth.
Coinbase Global, Inc. (NASDAQ: COIN) stock was given an Outperform rating by investment advisory Oppenheimer on May 10 with a price target of $434. However, the share price of the firm still dropped close to 2% after the ratings update in tandem with an overall lull for the crypto industry in general throughout the market.
Despite initial misgivings, several hedge funds have disclosed holdings in crypto-related stocks in recent weeks, including Third Point LLC and Ark Investment Management, among others.
4. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 147
PayPal Holdings, Inc. (NASDAQ: PYPL) is a California-based online payments company founded in 1998. It is placed fourth on our list of top 10 financial stocks today. The firm is most famous for offering favorable exchange rates and giving users the option to maintain accounts in several different currencies at one time. Recently, the company announced that it would accept cryptocurrency payments and link them to its network. The share price of PayPal has been soaring as the pandemic leads to more digital money transfers around the world.
On May 5, PayPal Holdings, Inc. (NASDAQ: PYPL) posted earnings for the first quarter of 2021, reporting a revenue of more than $6 billion, beating market estimates by $130 million and up more than 30% compared to the revenue from the same period a year ago.
At the end of the fourth quarter of 2020, 147 hedge funds in the database of Insider Monkey held stakes worth $15.9 billion in the firm, down from 150 in the preceding quarter worth $11.5 billion.
3. S&P Global Inc. (NYSE: SPGI)
Number of Hedge Fund Holders: 75
S&P Global Inc. (NYSE: SPGI) is a New York-based financial information and analytics company founded in 1917. It is ranked third on our list of top 10 financial stocks today. The firm has ratings, market intelligence, and indexing divisions dedicated to providing finance professionals with research and market benchmarks. The company stock has returned more than 27% to investors over the past twelve months. The firm has dealings with all kinds of clients, including commercial banks, investment advisors, and corporations.
S&P Global Inc. (NYSE: SPGI) is a good option for income investors as it regularly pays a healthy dividend to shareholders. On March 5, the firm declared a quarterly dividend of $0.77 per share, in line with previous. The forward yield stood at 0.78%.
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 2.5 million shares worth more than $853 million.
In its Q4 2020 investor letter, Baron Funds, an investment management firm, highlighted a few stocks and S&P Global Inc. (NYSE: SPGI) was one of them.
“S&P Global Inc. provides credit ratings, indices, data, and analytics to the financial and commodities markets. The company reported strong financial results due to continued growth in debt issuance. However, the stock declined on investor expectations that issuance will moderate in 2021 due to tough comparisons and potentially higher interest rates. Also, the company’s announced acquisition of IHS Markit received a mixed reaction, potentially due to the size and complexity of the combined company as well as overlapping ownership causing some shareholders to reduce concentration. We continue to own the stock as we see a long runway for growth and significant competitive advantages for the company.”
2. Visa Inc. (NYSE: V)
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE: V) is a California-based company that primarily facilitates electronic money transfers. It was founded in 1958 and is placed second on our list of top 10 financial stocks today. The company offers debit cards, credit cards, and other financial services under brands like Visa, Visa Electron, Interlink, VPAY, and PLUS. Visa stock has returned more than 26% to investors over the past year. Visa also operates the popular VisaNet, a transaction processing network making digital payments easier for businesses.
On April 28, Visa Inc. (NYSE: V) stock jumped more than 2% on the back of strong fiscal quarter earnings that beat market estimates on revenue and earnings per share. Net revenue for the fiscal quarter ended March 31 was $5.73 billion, beating market forecasts of $5.5 billion.
At the end of the fourth quarter of 2020, 166 hedge funds in the database of Insider Monkey held stakes worth $23.5 billion in the firm, up from 160 in the preceding quarter worth $18.6 billion.
In its Q1 2021 investor letter, Wedgewood Partners, an investment management firm, highlighted a few stocks and Visa Inc. (NYSE: V) was one of them.
“Visa payment volume recovered along with consumer spending habits, finishing up +5% during the December quarter; but it skewed heavily toward online purchases, particularly with debit. Historically, Visa has had a meaningful portion of its volume derived from higher-yielding credit card spending related to cross-border travel and entertainment (T&E). As many countries maintain closed borders, Visa’s cross-border T&E segment has stayed depressed. However, we expect this business will rebound as borders inevitably reopen to COVID-19 vaccinated populations. In the meantime, we trimmed Visa to help fund a reestablished position in Booking Holdings, which should disproportionately benefit from the aforementioned reopening as well.”
1. Berkshire Hathaway Inc. (NYSE: BRK-A)
Number of Hedge Fund Holders: 110
Berkshire Hathaway Inc. (NYSE: BRK-A) is a Nebraska-based holdings company founded in 1839. It is ranked first on our list of top 10 financial stocks today. Although the company has stakes in several large companies, the core business remains dealings in insurance financials. Berkshire stock has returned more than 64% to investors over the past year. The firm is controlled by legendary investors Warren Buffett and Charlie Munger. The share price of the company has jumped close to 12% over the past few weeks as the economy reopens.
On May 3, Berkshire Hathaway Inc. (NYSE: BRK-A) chief Buffett told an American news outlet that energy tycoon Greg Abel would be his successor at the firm. Abel presently leads the non-insurance business dealings of the group.
Out of the hedge funds being tracked by Insider Monkey, Washington-based Bill & Melinda Gates Foundation Trust is a leading shareholder in the firm with 42.1 million shares worth more than $9.7 billion.
In its Q1 2021 investor letter, Vltava Fund, an investment management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE: BRK-A) was one of them.
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway. Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
You can also take a peek at 10 Best Travel Stocks to Buy Right Now, and 10 Best Automotive Stocks to Invest in Now.
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Disclosure: None. Top 10 Financial Stocks Today is originally published on Insider Monkey.
