With rising yields and persistent concerns about inflation, it might be prudent to consider making a deposit into some of the top names in the financial sector at this time.
The Federal Reserve has all but confirmed that interest rate hikes are coming shortly and that tapering of central bank asset purchases is also on the horizon, which is expected to benefit financial stocks in a big way going forward. Investors should also be attracted to the prospects of a global economic recovery, which could improve loan activity and boost consumer spending going forward.
All of this supports adding shares of the top financial stocks, as the sector is likely going to outperform in the near term. There’s no shortage of quality companies to choose from for exposure to this important area of the market, yet a few financial stocks stand out as no-brainer buys at this time given their recent impressive earnings results and renowned brand names.
Let’s take a look at 3 attractive options to consider below:
1. BlackRock
BlackRock (NYSE:BLK) is a solid pick in the sector given that it's one of the leading investment management companies in the world and the largest asset manager in the United States. It’s a company known for being an expert in fixed income asset management, which is certainly an advantage given all of the moving parts occurring within the financial system at the moment. The company had $9.464 trillion in total assets under management at the end of September, a staggering figure that tells investors just how many institutional and retail investors are willing to trust the company with their capital.
If you’ve traded ETFs before, you might be familiar with the company’s iShares ETF platform, which has a leading market share and is another intriguing aspect of its business. BlackRock also offers advisory services for institutional and retail clients all over the world, along with risk management services and enterprise investment system outsourcing.
The company reported impressive Q3 earnings including record revenues of $5.05 billion, up 16% year-over-year, and a 23% increase in diluted EPS. The bottom line here is that BlackRock is a well-diversified financial behemoth that should be one of the first names investors look at when adding exposure to the sector.
2. Bank Of America
If you’re going to own a retail and commercial bank, why not own one of the largest in the country? Bank of America (NYSE:BAC) has a strong presence in consumer and commercial banking, investment banking, trading, and wealth management and the stock is currently trading at multi-year highs on the back of a strong earnings report. Q3 net revenues beat street estimates and jumped by 12% year-over-year to $22.8 billion, with record asset-management fees and record advisory fees impressing investors.
Another encouraging update from the report was the fact that loan balances increased by 9% on an annualized basis from Q2, which could mean that Bank of America’s lending business is poised for a strong finish to the fiscal year. The stock is also a good pick in the financial sector thanks to its 1.86% dividend yield and higher sensitivity to interest rates than competitors, which means Bank of America should see a nice boost to its profits if we do see a rate increase in the coming months.
3. Morgan Stanley
Last but not least, we have Morgan Stanley (NYSE:MS), an iconic financial services firm in the United States with operations in investment banking, securities, and investment and wealth management. It’s another big bank that delivered on its Q3 earnings, with an EPS beat of $0.30 based on the average street estimate.
Revenue for the company increased by 25% year-over-year to $14.8 billion, confirming that the recent acquisitions of E*TRADE and Eaton Vance (NYSE:EV) are already paying off. Morgan Stanley also reported record net new assets of $135 billion in its wealth management segment, which tells us that plenty of new investors are confident in the company’s renowned advisory services.
This stock features the strongest dividend yield out of all of the options on this list, with an attractive 2.77% dividend yield that should not be overlooked. There’s also a lot to like about Morgan Stanley’s global investment banking business, as the equity underwriting and IPO markets should remain strong in the near term. This is a high-quality name in the financial sector that consistently delivers outstanding earnings, making it a no-brainer buy after the stock recently reclaimed all of the major moving averages.