While things were looking dreary for companies in the financial sector throughout 2020 largely due to continually decreasing interest rates and a stagnant economy, it seems that money has started to flow back into many of the sector’s most well-known stocks. While there are still some risks associated with the sector to keep in mind, particularly since a full economic recovery has yet to occur, there are still plenty of financial stocks that are worth considering at this time.
Most investors immediately think of banks when they are considering financial stocks, but the truth is that the financial sector is diverse and offers plenty of different types of businesses to look at. If you have been hesitant to add back names in the financial sector due to their underperformance last year when compared to the broad market, now is a great time to start doing some shopping. Let’s take a look at the top 3 financial stocks to buy in February.
While many investors will likely be interested in adding domestic companies to their portfolios to gain exposure to the financial sector, it might pay off to consider investing in a strong international company like UBS. UBS Group is the worldwide leader in wealth management and offers high-net-worth clients safety and diversification with its Swiss private banking accounts. As global wealth continues to become more concentrated, UBS is a company that could see strong growth thanks to its focus and expertise in wealth and asset management.
The Swiss multinational bank and financial services company is the perfect example of a global bank that is getting things right in a post-pandemic world. A few years back, the company switched its strategy to focus more on its strength in wealth management and decided to cut back on investment banking and its legacy businesses. That decision seems to be paying off, as the company reported a net profit of $1.7 billion in Q4 2020, which was over double the $722 million reported the year before. UBS also has a share buyback program that was recently ramped up to $4.5 billion. The company will purchase at least $1.1 billion of stock in the first quarter, which should lead to higher share prices in the short-term.
If you’re looking for a financial stock in February that has tons of momentum, look no further than Paypal
. It’s safe to say that fintech is the future, and Paypal is a true leader in technology-enabled financial transactions. Paypal’s technology platform allows consumers and merchants to handle digital and mobile payments all over the world. It’s a very innovative company that continues to introduce new offerings including the recent Venmo Credit Card and a cryptocurrency investing service that allows account holders to buy, hold, and sell cryptocurrency on their Paypal accounts.
Paypal recently reported extremely strong Q4 earnings that saw total payment volumes increase by 39% year-over-year. GAAP EPS came in at $1.32, up 208% year-over-year. FY 20 was the strongest one in Paypal’s history, and with the way that the company is growing its user base, there’s plenty of reasons to believe that this year will be another huge one for the fintech leader. Additionally, investors can probably count on even more payment volume growth as consumer spending rebounds and the economy gets back to normal.
The final financial stock on our list is a value stock with a low forward P/E ratio of 8.73 that should be attractive to investors that are interested in a bargain. Aflac is a company that provides supplemental health and life insurance in Japan and the U.S. The company recently reported 4th quarter earnings per share of $1.35 which accounted for a year-over-year increase of 27.5%. Aflac also announced in January that it is launching Aflac Dental and Vision Insurance which expands its product offerings and could help to increase its number of customers over time.
While the pandemic has negatively impacted the company’s revenues in the short-term, sales should bounce back soon as the number of cases declines and vaccinations continue to be distributed. Aflac also has a nice history of dividend increases and is considered a dividend aristocrat, which is typically a sign of quality and consistency. The company recently raised its dividend by 17.9% to $0.33 per share. The stock currently offers investors a 2.9% dividend yield and is a great option for value investors who want exposure to the financial sector at this time.
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Before you consider PayPal, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and PayPal wasn't on the list.
While PayPal currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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