Financial stocks have been rising since the U.S. presidential election, in anticipation of fewer regulations. The question is whether the run is over or just beginning.
The answer to that question may lie with the Federal Reserve Bank (Fed). If it keeps raising interest rates, the financial sector will most likely benefit. Couple rising interest rates with an expanding economy, and there is much that bodes well for the financial sector.
On the other hand, it could be time for financial stocks to pull back a bit. Investors may take profits and doubters may decide to get out. These pullbacks could be buying opportunities for investors who think the financial sector is going higher.
We have selected the top financial stocks that are already doing well and have good prospects in early 2018. They were selected based on two factors: they are in an uptrend, and they pay a dividend. All figures were current as of Feb. 14, 2018.
KKR is a private equity firm. The company works in the area of acquisitions and buyouts, especially in the software sector. KKR invests globally, so this is one to watch in terms of the world economy, not just the U.S. economy.
Since the November 2016 election, the stock has been rising. There has been some notable volatility, but the stock may be settling into a relatively tame upward price channel.
Avg. Volume: 2,841,293
Market Cap: $17.64 billion
PE Ratio (TTM): 11.00
EPS (TTM): 1.95
Dividend & Yield: 0.68 (3.16%)
1y Target Est: 26.31
Bank of America has said that a move in interest rates of 100 basis points would increase the company’s interest income by $7.5 billion. The Fed has indicated it will raise rates for the foreseeable future, so BAC is in a position to prosper from the hikes.
This financial stock is in an uptrend that started in October 2016. Daily trading ranges have been small, indicating that buyers have a slight edge over sellers, but no one is making any dramatic moves. This can make it easier to buy into the stock. Investors may want to buy on the dips.
Avg. Volume: 76,452,209
Market Cap: $327.5 billion
PE Ratio (TTM): 20.41
EPS (TTM): 1.56
Dividend & Yield: 0.48 (1.54%)
1y Target Est: 34.34
KeyCorp is a bank holding company. It deals in loans, including mortgages, as well as loans to businesses and individuals. KEY also provides wealth management for high-net-worth customers.
The stock has been rising since October 2016. It formed a base after the original breakout. Annual income and revenues have been rising for the past four years.
Avg. Volume: 10,406,393
Market Cap: $22.57 billion
PE Ratio (TTM) 18.75
EPS (TTM): 1.13
Dividend & Yield: 0.42 (2.04%)
1y Target Est: 23.46
Goldman Sachs continues to dominate the financial sector. This investment banker has worldwide influence and is benefiting from rising interest rates, as well as the economic expansion.
GS handled a record amount of mergers and acquisitions in 2016 and continues to lead in market share. Earnings in the fourth quarter of 2017 beat analysts' expectations, but investors were disappointed that the recent tax overhaul will benefit the firm less than expected.
Avg. Volume: 3,417,469
Market Cap: $98.74 billion
PE Ratio (TTM): 29.06
EPS (TTM): 9.01
Dividend & Yield: 3.00 (1.17%)
1y Target Est: 268.29
The Bottom Line
If you think the economic expansion is likely to continue, it is reasonable to expect the financial sector to lead the way. There have already been some big winners in the sector, and the four financial stocks we have chosen here look have a good outlook for 2018. This is a good sector to buy on the dips and build a position slowly.