The financial sector is made up of companies that operate in the various offerings within the finance industry–encompassing everything from insurance and money management to payments and digital banking technology. This sector includes some of the world’s most well-known and largest companies, such as Square, Morgan Stanley, American Express, and Bank of America. The shares are known as financial service stock.
Stocks in the financial services sector, which are holistically represented by the Fidelity® MSCI Financials ETF (FNCL), have broadly outperformed the market, but it helps to review each new stock to learn which are or will perform the best.
Here are the top financial stocks with the highest growth, greatest value, strongest momentum, and most searches on Google.
Quick Look at the Best Financial Service Stocks:
- JC Penny
- KeyCorp
- Silvergate Capital Corp
- Rocket Companies
- KKR
- Morgan Stanley
Overview: Financial Service Stocks
Financial services companies offer an array of services and products, known as financial service stock, to help customers create wealth and manage their financial portfolio. This industry can be classified under 5 subsectors.
- Banks are among the oldest financial institutions in the world. You can open an account as an individual or a corporate entity. Financial services include deposits and withdrawals of money, safes to store valuables, loans and more. Some of the major players in the United States are JP Morgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Citibank (NYSE: C).
- Asset management companies invest the combined capital from customers into stocks, real estate, mutual funds and exchange-traded funds (ETFs). These firms manage the risk of customer investment portfolios to provide a consistent rate of return. A few of these renowned asset management firms include Fidelity (NYSE: FNF), Charles Schwab (NYSE: SCHW), UBS Group (NYSE: UBS) and Vanguard Group.
- Insurance companies help you plan expenses due to unforeseen events. Your monthly premium will provide financial coverage of perils covered by your policy. Berkshire Hathaway (NYSE: BRK.A), MetLife (NYSE: MET) and United Healthcare (NYSE: UNH) are among the largest insurance companies in the world.
- Venture capital firms invest in early-stage companies in exchange for an equity stake or shares in the company. Startups and small businesses can pitch a business idea for funding from a panel of investment experts. Accel, Sequoia Capital and Lightspeed Venture Partners are some of the most active venture capital firms out there.
- Private equity firms directly invest a majority stake in a company or outright buy the company. Private equity firms optimize operations by cutting costs and improving the growth of the company before reselling it for a profit. A few notable private equity firms in the market are The Carlyle Group (NASDAQ: CG), The Blackstone Group (NYSE: BX) and Apollo Global Management (NYSE: APO).
Invest your money in these financial services companies to ramp up your portfolio and earn solid returns on your investment. You can access the stock market, capital markets, loans, insurance policies and a range of investment funds. Because of this, investment services are quite popular, and there are even tax incentives to be had when you work with one of these companies. At the same time, you can invest in their stocks to gain similar exposure.
Best Online Brokers for Financial Services Stocks
Online brokers let you trade stocks, penny stocks, ETFs, mutual funds and other financial products on a single platform. These online brokers equip you with the tools and educational resources to improve your trading skills.
Benzinga suggests these top online brokers to get you started.
Features to Look for in Financial Services Stock
1. Earnings per share is the portion of a company’s profit allocated to each outstanding share of its common stock. You can determine the profitability of a company by its EPS. To calculate the EPS, divide the net income of a company by its total number of outstanding shares.
2. The price-earnings (P/E) ratio of a company is calculated by dividing the price of the stock by its EPS. The lower the P/E ratio, the better an investment it is. You can find many stocks under $10 with the lowest P/E ratio.
3. Free cash flow: Financial service companies have strong cash flows due to constant additions of their client’s assets under management (AUM). Compare the cash flow and cash equivalents held by a company every quarter to find the best financial service stocks to invest in.
Fintech to Fortify Your Future
Paperless transactions and internet banking have revolutionized the financial services industry. Stocks from this sector optimize processes to enable hassle-free wealth management. Consider investing in these up-and-coming fintech stocks to secure your financial future.
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Financial stocks can be a good investment, but the downside is that they can be affected by interests rates.
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The types of companies in the financial sector are brokerage firms, commercial banks, CPA firms, insurance companies, investment banks, and planning firms.
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The largest financial company is JPMorgan Chase.
