The financial sector is comprised of companies that offer services including loans, savings, insurance, payment services, and money management for individuals and firms. Financial sector stocks include a wide range of companies involved in retail and commercial banking, accounting, insurance, asset management, credit cards, and brokerage. Well-known companies in the sector include Wells Fargo Co. (WFC), Goldman Sachs Group Inc. (GS), and Morgan Stanley (MS).
Financial stocks, represented by the Financial Select Sector SPDR ETF (XLF), have dramatically underperformed the broader market, providing investors with a total return of -13.2% compared to the Russell 1000's total return of 13.7% over the past 12 months. These market performance numbers are as of September 22; the statistics in the tables below are as of September 23.
Here are the top 3 financial stocks with the best value, the fastest earnings growth, and the most momentum.
Best Value Financial Stocks
These are the financial stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Financial Stocks|
|Market Cap ($B)||12-Month Trailing P/E Ratio|
|Brighthouse Financial Inc. (BHF)||26.58||2.5||1.2|
|Unum Group (UNM)||16.84||3.4||3.6|
|MetLife Inc. (MET)||36.95||33.5||4.8|
- Brighthouse Financial Inc.: Brighthouse Financial is an insurance and investment management company. The firm provides guaranteed, variable, shield, income, and fixed annuities, life insurance, financial advisory services, and retirement planning. In Q2, annuity sales decreased by 3% year-over-year (YOY) while life insurance sales climbed by 200% YOY.
- Unum Group: Unum provides disability insurance, group life insurance, and payroll-deducted voluntary benefits for employees primarily at U.S. corporations.
- MetLife Inc.: MetLife offers life insurance, auto and homeowners insurance, employee benefits, retail banking, and other financial services. On September 17, MetLife announced plans to acquire Versant Health, the owner of Davis Vision and Superior Vision, from an investor group. The all-cash transaction is estimated at roughly $1.7 billion.
Fastest Growing Financial Stocks
These are the financial stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
|Fastest Growing Financial Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|White Mountains Insurance Group Ltd. (WTM)||788.00||2.4||476.7|
|Ares Management Corp. (ARES)||39.51||9.8||400.0|
|PNC Financial Services Group Inc. (PNC)||105.36||44.7||191.7|
- White Mountains Insurance Group Ltd.: White Mountains Insurance provides property and casualty insurance as well as reinsurance products. The company serves customers throughout the U.S. as well as in Bermuda.
- Ares Management Corp.: Ares Management is an investment management company offering asset management as well as equities, credits, real estates, financial planning and other advisory services. In Q2 2020, key funds managed by Ares Management closed $1.7 billion in commitments, and $4.4 billion year to date.
- PNC Financial Services Group Inc.: PNC Financial is a diversified financial services company that offers banking and asset management services. For Q2 2020, PNC reported a YOY net income increase of 166.0%. During the quarter, the company divested its 22.4% equity investment in BlackRock Inc. (BLK) for net proceeds of $14.2 billion. PNC attributes its strong net income performance in part to this sale.
Financial Stocks with the Most Momentum
These are the financial stocks that had the highest total return over the last 12 months.
|Financial Stocks with the Most Momentum|
|Market Cap ($B)||12-Month Trailing Total Return (%)|
|PayPal Holdings Inc. (PYPL)||187.78||220.3||79.5|
|MSCI Inc. (MSCI)||351.24||29.4||57.0|
|Virtu Financial Inc. (VIRT)||26.28||5.1||43.4|
|Financial Select Sector SPDR ETF (XLF)||N/A||N/A||-13.2|
- PayPal Holdings Inc.: PayPal Holdings is a digital and mobile payments provider catering to consumers and merchants. The company provides online payment solutions to customers around the world. On August 31, PayPal announced "Pay in 4," a new short-term, interest-free installment payment option for U.S. customers. The new option is designed to pay merchants and partners upfront while allowing customers to pay for purchases between $30 and $600 over a 6-week period.
- MSCI Inc.: MSCI is a finance company that offers services to customers including asset managers, banks and wealth managers to help them make key financial decisions, including trading securities and managing their portfolios. MSCI publishes a long list of prominent indexes that track a broad range of securities. On September 16, the company announced the release of its SDG Alignment Tool, designed to help investors assess companies' net contribution toward the 17 United Nations Sustainable Development Goals.
- Virtu Financial Inc.: Virtu Financial is a financial services company and market maker. The company aims to provide liquidity, execution services, analytics, and connectivity products. Virtu's products support trades across various asset classes and in more than 50 countries worldwide.
YCharts. "YCharts." Accessed Sept. 23, 2020.
Brighthouse Financial Inc. "Brighthouse Financial Announces Second Quarter 2020 Results," Page 1. Accessed Sept. 23, 2020.
MetLife Inc. "METLIFE TO ACQUIRE VERSANT HEALTH, OWNER OF DAVIS VISION AND SUPERIOR VISION." Accessed Sept. 23, 2020.
Ares Management Corp. "Ares Management Corporation Highlights Second Quarter and Year-to-Date U.S. Direct Lending Commitments." Accessed Sept. 23, 2020.
PNC Financial Services Group Inc. "PNC Reports Second Quarter 2020 Net Income Of $3.7 Billion, $8.40 Diluted EPS, Reflecting Gain On BlackRock Sale." Accessed Sept. 23, 2020.
PayPal Holdings Inc. "PayPal Introduces New Interest-Free Buy Now Pay Later Installment Solution." Accessed Sept. 23, 2020.
MSCI Inc. "MSCI Launches Tool to Help Investors Assess Alignment to UN Sustainable Development Goals." Accessed Sept. 23, 2020.