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8 Financial Stocks To Watch

Published 10/20/2020, 03:10 AM
Updated 07/09/2023, 06:31 AM

Forecasting stock performance is always a risky proposition, especially in the uncertain times we are currently experiencing. As the world fast approaches the one year mark of the current global pandemic, we find ourselves on the precipice of another event that could have global implications both politically and financially: the United States federal election.

One month from now we will know if President Trump has been re-elected or if Vice President Biden will be starting his tenure. Depending on who you ask, the outcome of the federal election could have a direct effect on the stock markets and the monetary policies of the federal reserve.

Some analysts believe a Trump re-election will only continue the surging performance of the major indices. Some analysts believe the performance of the stock market ultimately has more to do with interest rates and stimulus packages, than which party sits in the oval office.

Whichever side of the argument you are on, know that the result of the election will have far-reaching effects that could trickle down into specific investments you may have on your radar. Let us take a look at eight financial sector stocks that could thrive in November, regardless of the outcome of the election.

1. Citigroup 

Citigroup  (NYSE:C) which is known mostly for CitiBank, the fourth largest bank in America by total assets, is reporting its quarterly earnings on October 13th and early whisper reports are that it may fall short of consensus Wall Street estimates.

This is an interesting time for Citi as they recently made history by announcing the first-ever female CEO in Jane Fraser. While Ms. Fraser much deserved the position, the real story here is that companies, especially ones as large as CitiGroup, often find transitioning to a new CEO a difficult period to get through.

With a Trump re-election, all of the major banks should benefit from the reduced corporate tax rates that they are already enjoying. If CitiGroup does indeed disappoint at its upcoming earnings call, I like the stock as a buy-low opportunity for when Fraser’s true vision and path are properly instituted which could be as early as next quarter when she takes the helm in February of 2021.

2. Bank of America

Another big bank, Bank of America (NYSE:BAC) is the second-largest bank in the United States by total assets. Yet another bank that would probably prefer a Trump re-election, but should do well regardless given the interest in consumer investing and no slowdown in the mortgage industry.

Buying ahead of earnings calls is always risky, but the banking industry has already been hammered during the pandemic, and low-interest rates may keep them down for even longer.

What it does mean is that investors are currently getting the stock at a discount and what more do you need to know than the fact that Warren Buffet recently made this his second-largest holding for Berkshire Hathaway (NYSE:BRKa).

3. Square

The future of payments and digitized currency, Square'a (NYSE:SQ) stock has already surged nearly 200% since the start of the year even as many other financial companies struggled to keep their heads above water.

Square’s contactless payment and ever-popular CashApp have been one of the revelations of the pandemic. As we move towards a future where cash is being used less and less, look for Square to continue to thrive, regardless of who wins the election. An investment in the square is a long play on digital payments and the future of transactions revolving around mobile phones.

4. PayPal

Much like Square, PayPal Holdings Inc (NASDAQ:PYPL) is a huge name in the digital payments sector with an even wider, global audience than Square. Currently, Square only operates in Australia, the U.S., the U.K., Canada, and Japan, and the rest of the world uses PayPal.

Also much like Square’s CashApp, Paypal’s Venmo app has been a savior for small businesses and the new emergence of the gig economy. Long Square and long PayPal, as digital payments continue to eat up a larger part of transactions now and for the future.

5. Brookfield Asset Management

A shift to a different type of financial stock, Brookfield Asset Management Inc (TSX:BAMa) is the premier Canadian asset management corporation and is trading at a serious discount right now. While shares are trading at a discount, the current low-interest-rate environment is perfect for companies like BAM who deal in large scale transactions for assets, property, and existing firms.

If you believe this environment should continue for the next few years, it should give BAM ample opportunity to load up on assets at a discount. If you want to diversify even more, take a look at BAM’s spin-off Brookfield Renewable Resource Partners (TSE:BEP) which is a tremendous play in the alternative and clean energy sectors, something that either Presidential candidate will have to acknowledge during the next term.

6. Mercadolibre

Talk about a runaway freight train, MercadoLibre (NASDAQ:MELI) is now up almost 100% year to date and up nearly 900% over the last five years. This may be a stock that is not on mainstream investors' radars, but if you are a believer in the digital payment space, this is a stock for you.

MELI is an operator of online market eCommerce platforms as well as its digital payment service MercadoPago. Think of this as a Square for Latin America, one of the largest untapped regions in the world for Fintech services. There is a large portion of Latin America who does not use brick and mortar bank accounts so to streamline payments and money transfers through mobile phones is a match made in heaven.

MELI is the first-mover in this space in the region and continues to grow all throughout South America. Its recent quarterly report shattered Wall Street estimates and the company should continue to surge both during and after the pandemic. If you think that some American companies may be riskier depending on who wins the election, look to markets outside of the U.S. to provide a little more stability moving forward.

7. Sea Limited 

Notice a trend here? Shifting from MELI in Latin America to Sea Limited in Southeast Asia, Sea Ltd (NYSE:SE) provides the area with a trifecta of an eCommerce platform, mobile gaming, and digital payments. Wow, talk about three of the hottest sectors to get into today.

As with many digital payment companies, Sea Limited has kept its performance up during the pandemic and has allowed a developing region in the world to fully digitize its payment methods. What is more, SE is backed by Chinese behemoth Tencent, who owns a 25% stake in the company.

Digital payment and transactions made up just 1% of its revenues during the most recent quarter but that was still good enough for a near 300% year-over-year growth. This is another company that should continue to thrive regardless of who is in the White House, and investors can expect the type of growth we have already seen from MELI for SE in the future.

8. Mastercard

A little closer to home, Mastercard Inc (NYSE:MA) remains the leader in the American credit card space and with its recent acquisition of fintech company Marqeta, have now fully immersed themselves into the digital payment space.

Mastercard has always been a forward-thinking company and while international and domestic travel have been rendered obsolete, online shopping and eCommerce payments have more than made up for the difference. Mastercard is just one of those steady blue-chip stocks that has continued to deliver as shares are now up over 250% over the past five years.

One thing to keep in mind is the news on the recent stimulus checks that are being debated in Congress. Unemployment has been an unfortunate side effect of the pandemic, and if federal stimulus is not given to American citizens, it could result in a spike in credit card usage which can only serve to benefit Mastercard’s bottom line.

So here you have eight financial sector stocks to watch for in November, as the United States and the world keep watch over who will be sitting in the oval office come 2021. The big American banks like Citi and Bank of America have been battered this year but in the short-term, they could provide buy-low opportunities for long-term investors. Keep an eye and ear out for their upcoming earnings report and assess accordingly. The digital payments space holds some of the fastest-growing fintech stocks in any of the major indices. Square and PayPal should continue to grow, especially as we come out of the pandemic and people remain cautious about hygiene and leaving their homes. According to Hassan Al-Shama, Founder and CEO at Consulting Centrale, investing in the financial and industrial sectors of emerging markets, such as Africa, can be very prosperous for a future that requires decisive economic heavy-lifting. Even though MELI and Sea Limited in Latin America, which are excellent ways to hedge against American and global uncertainty in the short-term, and in the cases of these two excellent companies for the long-term as well.

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