Over the past few years, investing in financial services stocks has been a case of buying the best and forgetting the rest. That narrowed the field considerably. However, nearly halfway through 2024, there seems to be an uneasy equilibrium settling into the sector. And that could broaden the field of financial services stocks to buy.
The stock market continues to defy easy explanations, but frequently you have to invest for the market you have, not the market you may expect. Right now, the economy is in a Goldilocks moment of sorts. Inflation is still lurking, but corporate earnings suggest that there’s still some growth to be had. The Federal Reserve has stopped raising interest rates, and analysts are becoming more bullish on an interest rate cut occurring in September, if not sooner.
That means it’s time to look at a sector that relies on consumer spending and investing. Here are three financial services stocks to buy for the back half of 2024.
Visa (V)
Although it may be time to consider some risks in the financial services sector, there’s nothing wrong with keeping it simple and buying Visa (NYSE:V). The company is the leader in the payment processing space and, whether you’re making transactions via a debit card or credit card, there’s a better than 50-50 chance that it’s a Visa product.
Visa continues to increase revenue and earnings year over year despite the belief that the consumer is tapped out. That sentiment is supported by the number of credit card delinquencies in the first quarter of 2024 which has now pushed above 2019 levels.
This is a problem for many Americans, particularly those with lower incomes who have been beaten down by persistent inflation and rising interest rates that are finally in full effect. But it’s a problem that Visa is positioned to manage through.
Analysts agree. To bear that out, 26 out of 40 give V stock a “strong buy” rating that indicates 12.5% upside for investors, to go along with a dividend that has been growing for 16 consecutive years.
Chubb (CB)
Chubb (NYSE:CB) was revealed as the mystery buy made by Berkshire Hathway (NYSE:BRK-A, NYSE:BRK-B) and, by extension, Warren Buffett. As our own Dana Blankenhorn points out, this buy is consistent with Buffett’s recent moves away from his favorite consumer stocks and into financial services. And when it comes to financial stocks, insurance is Buffett’s wheelhouse.
It’s important to note that insurance premiums are rising. However, unlike many discretionary purchases, including staple items, consumers must pay their insurance premiums.
This growth is reflected in Chubb’s revenue and earnings which are showing strong year-over-year growth. That’s one reason why some analysts believe Berkshire may make a move to buy Chubb outright.
Buffett himself seemed to dispel that notion at Berkshire’s annual meeting. However, many investors want to be like Buffett. Now that CB stock is a Buffett stock, it should at least be on your watchlist of financial services stocks to buy. For now, analysts are keeping their expectations muted, but more bullish news from Berkshire could send price targets higher.
Robinhood (HOOD)
Risk-tolerant investors may want to look at Robinhood (NYSE:HOOD). The company practically invented the zero percent commission trading that is now an industry standard. And yes, the company is known for attracting the meme stock crowd. But get dismissive about HOOD stock at your own risk. The company is forcing its way into the financial services conversation.
For starters, the company is aggressively targeting investors with high net worth. Its current promotion offers a 1% bonus to anyone who transfers their account from an outside brokerage. The company also offers the Robinhood Gold credit card with 3% cash back on any purchase. Robinhood Gold members also get additional ways to earn interest on their money.
As Chandler Capital pointed out for InvestorPlace, the strategy is working. The company’s net deposits reached a record high of $11.2 billion in the last quarter. And it saw its gold subscriber membership count grow 42% from a year ago.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
