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The financial sector is comprised of companies that offer services broadly aimed at providing loans, insurance, and money management services for individuals and firms. That list of financial sector service companies includes retail and commercial banking, accounting, insurance, asset management, credit cards, and brokerages. Well-known companies in the sector include Citigroup Inc. (C), Bank of America Corp. (BAC), and Morgan Stanley (MS). The sector, as measured by the Financial Select Sector SPDR ETF (XLF), has underperformed relative to the S&P 500 over the last 12 months. XLF posted a 12-month trailing total return of -22.5% versus the S&P’s -13.5%. These market performance numbers and the statistics in the tables below are as of March 24.
Below, we’ll examine the top three stocks in the financial sector for best value, fastest earnings growth, and most momentum.
Financial Stocks with the Best Value
Here are the financial stocks in the S&P 500 with the lowest 12-month trailing price-to-earnings (P/E) ratio in the sector. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows investors are paying less for each dollar of profit generated.
- Unum Group: Unum provides disability insurance, group life insurance, and payroll-deducted voluntary benefits for employees primarily at U.S. corporations. For Q4 2019, Unum reported net income of $296.2 million, a year-over-year (YOY) increase of 18.9%.
- Synchrony Financial: Synchrony Financial is a consumer financial services company offering a range of credit services, including private-label credit cards, small-and-medium-sized business credit products, and installment loans.
- Discover Financial Services: Discover Financial Services is a credit card issuer and electronic payment services provider. Besides credit cards, Discover offers a variety of loans, money market accounts, and certificates of deposit, as well as a network of automated teller machines. In the most recent quarter, Discover reported net income of $708 million, an increase of 3.1% YOY.
Financial Stocks with the Fastest Earnings Growth
These are the financial stocks in the S&P 500 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.
- Assurant Inc.: Assurant provides a variety of extended service contracts, vehicle protection services, and insurance products. The company serves customers around the world.
- Progressive Corp.: Progressive is an insurance holding company that provides various personal, automotive, and special property-casualty insurance products through its subsidiaries. In March, the company announced the pricing of $1 billion of senior notes in an underwritten public offering.
- Chubb Ltd.: Chubb is an insurance company offering personal and commercial insurance products in a variety of areas. The company’s board has called for the 27th consecutive annual dividend increase, to $3.12 annually.
Financial Stocks with the Most Momentum
These are the financial stocks in the S&P 500 that had the highest total return over the past 12 months.
|Financial Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|MSCI Inc. (MSCI)||231.55||19.7||22.0|
|MarketAxess Holdings Inc. (MKTX)||281.31||10.7||18.8|
|The Western Union Co (WU)||18.55||7.7||5.4|
|Financial Select Sector SPDR Fund (XLF)||N/A||N/A||-22.5|
- MSCI Inc.: MSCI offers market indexes and analysis to help investors trade securities and manage their portfolios. On March 4, the company announced that it had completed the private offering of $400 million 3.625% senior unsecured notes due 2030.
- MarketAxess Holdings Inc.: MarketAxess operates a platform for corporate and emerging market bond trading. Serving broker-dealer clients, the company offers price discovery, trade execution, and related services.
- The Western Union Co.: Global money transfer company Western Union offers primarily consumer-to-consumer transfers, as well as money orders and bill paying services. In Q4 2019, Western Union reported $1.3 billion in revenue, down 7% YOY.
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