In this article, we will take a look at the top 10 financial stocks today. You can skip our comprehensive analysis of these companies and go directly to the Top 5 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.
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.
“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.
“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.
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Disclosure: None. Top 10 Financial Stocks Today is originally published on Insider Monkey.