There’s no doubt that the current economic transition from low and slow (interest rates and growth) to fast and furious is wreaking havoc with the stock market. But that doesn’t mean finance stocks will pay the price.
The fact is, finance stocks — the good ones at least — are built to make money in any market. While most individual investors avoid short positions, options and broad hedge strategies, financial companies do it all the time. Banks and insurance companies have massive bond portfolios to manage and trade as well as more flexibility on rates.
They have legions of professional traders that get paid very well to make sure that regardless of market conditions they’re on the right side of trades. And they’re on top of order flow from clients and now how to take advantage. That’s why the short-term trading game is only for the stout-hearted (and deep-pocketed!).
The best way to approach this as an individual investor is to find the strong finance stocks that will make the best out of a bad situation — as well as good one. These seven all meet my criteria for doing just that:
- Raymond James (NYSE:RJF)
- Cincinnati Financial (NADSAQ:CINF)
- Columbia Financial (NASDAQ:CLBK)
- Woori Financial Group (NYSE:WF)
- Itaú Unibanco (NYSE:ITUB)
- Houlihan Lokey (NYSE:HLI)
- Signature Bank (NASDAQ:SBNY)
Finance Stocks to Buy: Raymond James (RJF)
Oddly enough, RJF, a leading investment management firm, go its start not in New York City, but in St. Petersburg, Florida, six decades ago.
Today, it’s a quiet giant with a nearly $21 billion market cap. It’s not as big as some of its brethren, but that can be a good thing. In this kind of volatility, it’s the headliners that take the big hits. RJF can keep its head down and do its work in peace.
In coming quarters, its banking division that offers commercial loans and mortgages should benefit greatly from high rates, because it gives lenders more flexibility in what they can charge customers.
The stock has gained 25% in the past 12 months, yet it has a price-to-earnings ratio (P/E) below 16. And it has a 1.4% dividend.
This stock has a “B” rating in my Portfolio Grader.
Cincinnati Financial (CINF)
As a mid-sized property and casualty (P&C) and life insurance company, CINF has been doing very well as the economy recovers from the pandemic. Also, a respite from significant storm damage in the past year has also helped.
Add to that the fact that interest rates are now rising. Given that P&C companies have to keep a large amount of their cash in cash-like equivalents like Treasuries, an active trading desk comes in quite handy. In this kind of market, money is flooding into bonds and that’s great for the investment side of CINF.
The stock has gained 15% in the past 12 months and 6% year to date. It still has a P/E below 7. It also has a solid 2.2% dividend.
This stock has a “B” rating in my Portfolio Grader.
Columbia Financial (CLBK)
Operating as a holding company, CLBK operates Columbia Bank, a community bank in New Jersey that has been operating for nearly 100 years. Suffice it to say that New Jersey has changed significantly in the past century. And a finance stock that has been a part of that change is well positioned in this current market.
As for insurers, banking is a cash business. And banks have to have plenty of reserves to meet customers’ needs and other operations. That means a big bond portfolio as well as conservative stock portfolio. Both of these investments are good performers in volatile markets with seasoned traders. And rising rates certainly help margins on loans.
CLBK stock has gained 25% in the past 12 months and 6% in the past three months. Earning will continue to increase and likely lower its current P/E of 24.
This stock has a “B” rating in my Portfolio Grader.
Woori Financial Group (WF)
There’s a good chance you haven’t hear of WF before. That’s because WF is the largest bank in South Korea and it’s owned by the South Korean government and the Korean Deposit Insurance Corporation.
It has an $8 billion market cap in the U.S. market. Its ownership means that there’s little risk it will have any significant troubles. And right now, it’s a bargain, with likely better performance ahead as the South Korean economy expands. An Asia-Pacific partnership that is meant to cut tariffs among participating nations is moving forward and that will be a great benefit for its regional trade.
Right now, WF stock trades at a P/E of just 4 and has risen 24% in the past 12 months, though it is down 2% in the past three months. It has a very reliable 3.2% dividend.
This stock has a “B” rating in my Portfolio Grader.
Itaú Unibanco (ITUB)
Given its share price of just around $5, it’s likely you may raise an eyebrow to this bank’s gravitas. But ITUB is the second largest bank in Latin America and has branches in North America, Europe and Asia. It has a $46 billion market cap, so it’s certainly a big bank with significant business globally.
And while it’s headquartered in Brazil, its broad reach gives it the ability to control risks and expand opportunities across diverse established and emerging markets.
ITUB stock has been doing very well. In the past 12 months, it has gained 19% and it has been very strong of late — up 17% in the past three months and 26% year to date. It also has an attractive 2.8% dividend and a P/E of 9.
This stock has a “B” rating in my Portfolio Grader.
Houlihan Lokey (HLI)
Operating from its Los Angeles headquarters, HLI is a multinational investment bank and advisory service for corporations, institutions and governments. It’s well known as the company that worked out the collapse of Lehman Brothers in 2008 with the company’s creditors.
The current dynamic market conditions are always exciting times when it comes to corporate strategy. This can a be a great time to look for merger and acquisition opportunities, or to refocus on specific business sectors. HLI is a trusted firm to help with these kinds of restructuring or shopping for partners. In 2021 it was the No. 1 firm in M&A transactions as well as distressed debt and restructuring.
But HLI only has a $7 billion market cap right now and a P/E of just 15. That means there’s plenty of upside, even after its 12-month 53% run. It also has a steady 1.7% dividend.
This stock has an “A” rating in my Portfolio Grader.
Signature Bank (SBNY)
SBNY is a commercial bank that has a client-focused approach to privately held companies. It also has subsidiaries that offer equipment leasing and broker-dealer services.
Given the amount of cash sloshing around in the markets these days, private companies count on their banks for advice in exploring their options. Whether clients are refinancing debt, looking for more investors, looking to sell property or leverage assets, SBNY offers solutions.
And firms with piles of cash like these kinds of markets to be able to acquire companies at good prices.
SBNY has rallied in the past 12 months — up 30% — but it has come off a bit in the past few months. But it’s still a value, with a P/E of 19.
This stock has an “B” rating in my Portfolio Grader.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place