Something interesting is going on with financial stocks. Bigger players have started snapping up money management companies.
And decent-sized money management companies are leaning less on their trading desks and more on their money management services for retail investors.
The thought is that steady income from retail investors is a smarter long-term strategy. Rather than the high stakes game of counting on traders to whip up big profits in the markets, the prospect of sticking to a slow and steady strategy has been much more popular.
The 7 financial stocks riding a new wave of interest are quality companies that are building their base or are potential takeover players. Either way, they’re worth a look.
- Artisan Partners Asset Management (NYSE:APAM)
- BlackRock (NYSE:BLK)
- Mr. Cooper Group (NASDAQ:COOP)
- eXp World Holdings (NASDAQ:EXPI)
- PennyMac Financial Services (NYSE:PFSI)
- Virtu Financial (NASDAQ:VIRT)
- T. Rowe Price Group (NASDAQ:TROW)
The shift could also signal that bigger firms feel the market is getting a bit wild, and thus hedging their bets is a smart move. For other firms in the real estate sector, this is a great time to expand since interest rates are low and will continue to be so for years to come.
Financial Stocks to Buy: Artisan Partners Asset Management (APAM)
With a market cap of $3.4 billion, APAM is a mid-sized firm in the global asset management business. In today’s world, that makes it a very attractive target for larger firms looking to bring in unique talent and expertise.
The company manages accounts for everyone from high net worth investors to institutions. It has a variety of vehicles to do that, and developed teams that function independently in their specific areas of focus.
But APAM is more than just a takeover play. It’s doing well on its own, and earnings estimates are moving higher.
The stock is up 34% year to date, 62% over the past year, and still trades at a P/E ratio of just 15. And it delivers a very generous 6% dividend.
You don’t get much bigger than BLK, with $7 trillion in assets under management. In fact, when the Federal Reserve jumped into action to buy bonds to save the U.S. economy and the U.S. dollar, they turned to BLK.
At this point, BLK runs the entire bond portfolio and much of the asset portfolio for the Federal Reserve. That’s a pretty good endorsement of company scope and quality.
Recently, the company announced that it was liquidating some of its private funds in China and rolling the money into its Chinese mutual fund business for individual investors. This will allow it to expand its market in China, a key growth market.
The stock is up 26% year to date and 38% in the past year. It delivers a 2.2% dividend and has P/E ratio of 21, well below the average for the S&P 500.
Mr. Cooper Group (COOP)
Yes, it’s an odd name that doesn’t really reveal much. But when you start a business in 1889, you’re not really thinking about how people will perceive the name 131 year later.
COOP is the third-biggest loan servicer and the largest non-bank servicer in the U.S. And it’s one of the top 15 loan originators in the US.
What’s more, its Xome division creates tech solutions for origination and servicing of mortgages. 53% of its Xome customers are third party firms. Fundamentally, this is a single family home mortgage company with a fintech division.
But even with all this going for it, it only has a market cap of $2 billion and trades at a P/E ratio of just 4. Yet the stock is up 76% year to date, and 78% in the past year.
eXp World Holdings (EXPI)
Real estate has gone through a lot of changes with the advent of cloud-based technology. Fintech has changed how loans are processed and serviced. And the cloud has changed how we shop for properties, whether it’s our dream home or a new office space.
EXPI has managed to take the real estate market global. It’s a full-service real estate brokerage that operates 24/7. It offers tools, training and networking for real estate brokers, plus it has a gross commission structure for agents that bring other agents into the business.
Of course, all of its listings are virtual. And in a hot real estate market, that’s a big deal, since investors are in many cases buying properties remotely due to the pandemic.
The stock is up a whopping 297% year to date and 416% in the past year. Yet short positions only make up about 5% of its float.
EXPI is expensive here, but low global interest rates for years to come give this stock a big runway.
PennyMac Financial Services (PFSI)
I have been bullish on this company for quite a while now. It’s the fourth largest home mortgage lender in the U.S., and the No. 1 lender of government loans.
That last statistic is important, because it means the government loans it originates are backed by the U.S. government. There’s very little risk to PFSI in the case of defaults.
The company is set up as a real estate investment trust (REIT) which gives it some tax advantages it passes on to investors, as well as a dividend. PFSI also has a sister REIT that holds the properties while it services the mortgages, also diversifying risk.
The stock is up 67% year to date and 77% in the past year, yet it has a PE of just 5. And it has a CD-besting 1% dividend.
Virtu Financial (VIRT)
Founded by the former head of the New York Mercantile Exchange, this company is a fintech for the brokerage and asset management industry. It’s a self-described market maker. And nowadays, all this is done online with proprietary software.
Basically, when you type in an order for a stock, VIRT, or a company like it, figures out the closest buy price and sell price and executes the order. The brokerage is linked into this process and fulfills the order.
For industry outsiders, VIRT is invisible. But its role is absolutely crucial in more than 230 exchanges, markets and dark pools, where bid/ask spreads are the lifeblood of the industry.
With higher volumes and expanding global markets, VIRT is quietly enjoying some serious growth as one of the industry’s top market makers. And it doesn’t matter to VIRT whether markets are going up or down, because it’s all about trade volume.
The stock is up 37% year to date and 30% in the past year, but it trades at a PE of 7. And it has a solid 4.3% dividend.
T. Rowe Price Group (TROW)
This asset manager has been around since 1937 and maintains its headquarters not on Wall Street, but in Baltimore, Maryland, where it began.
It’s also unusual because, in an age of passively-managed index funds, most of TROW funds remain actively managed.
It manages over 150 funds, more than half of which are stock funds, and has more than $1 trillion of assets under management. Its $33 billion market cap makes it a good-sized player in the industry and it is a very reliable performer as a stock and fund management company.
TROW isn’t a sexy player that will grab headlines, but it is a quality company that provides quality products for institutions and individuals and has a long record of success. And even at this size, it could be a tasty meal for a bigger player or a big firm looking to get in on the financial side of the market.
The stock is up 20% year to date and 29% over the past year. Plus, it has a solid 2.4% dividend.
On the date of publication, Louis Navellier had long positions in APAM and PFSI stock. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.