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Financial companies come in all shapes and sizes, from financial institutions to insurance companies to financial technology (fintech) companies. In general, these companies provide a financial service to their customers—like loans, credit cards, asset management, etc.—and are typically relatively stable investments.
But investors should know that during recessions and economic instability, financial stocks are usually some of the first to take it on the chin. The COVID-19 pandemic caused economic instability around the globe in 2020 and some financial stocks, particularly banks, were hit hard.
Thankfully, many financial stocks have rebounded in 2021 and are doing quite well right now. So let’s take a closer look at ten top financial stocks and why they may be a good fit for your portfolio.
Top 10 Financial Stocks
Here are the top 10 financial stocks you should consider investing in.
- Berkshire Hathaway
- JPMorgan Chase
- Coinbase Global
- PayPal Holdings
- Bank of America
- American Express
- Capital One
Visa (NYSE: V)
- Visa (NYSE:V)
- Price: $224.63 (as of close Sep 13, 2021)
- Market Cap: 477,746,918,024
Few companies will be more recognizable on this list than Visa. The company is the largest payment processor in the world—processing 140 billion transactions in 2020.
The influx of cashless payments that’s come with the rise of technology has created a massive $185 trillion global cashless payment market that will spur on Visa’s growth for years to come. To stay relevant in an ever-changing financial landscape, Visa’s management said that the company has focused its attention on e-commerce transactions and tap-to-pay cash digitization.
But Visa’s ongoing financial evolution doesn’t end there. The company has recently begun using Ethereum’s blockchain to convert digital currency into fiat currency. This will allow Visa to process some transactions faster and more efficiently than before.
Mastercard (NYSE: MA)
- Mastercard (NYSE:MA)
- Price: $347.82 (as of close Sep 13, 2021)
- Market Cap: 343,220,095,108
Mastercard functions in the same way as Visa, processing tons of transactions on its 2.8 billion cards and charging a small fee for those transactions.
Also like Visa, the company is hugely successful at this business and in 2020 processed $6.3 trillion in gross payment volume—and that’s even in the midst of a global pandemic that temporarily hurt Mastercard’s business.
The company is also focusing its attention on digital transactions and Mastercard recently said that it expects 20% to 30% of the e-commerce growth it experienced during the pandemic will be permanent.
Additionally, the company also sees potential value in using blockchain technology for transactions and the company already has 89 blockchain patents and 285 applications pending.
Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)
- Berkshire Hathaway (B shares) (NYSE:BRK.B)
- Price: $279.92 (as of close Sep 13, 2021)
- Market Cap: 633,353,554,418
Berkshire Hathaway is a conglomerate run by billionaire investing extraordinaire Warren Buffett. Buffett recently named his successor, but for now, he still runs the company.
Berkshire makes it on the financial stock list because it’s the parent company of the insurance giant GEICO and because Berkshire holds major positions in both Bank of America and American Express—two companies that are firmly in the financial industry.
While Berkshire used to hold many more positions in other banks—including Wells Fargo, JPMorgan Chase, and Goldman Sachs—the company has scaled back or eliminated those positions since 2020.
But with Buffett’s company holding about 19% of the shares outstanding for American Express and about 12% of Bank of America, Berkshire is still a key financial stock for investors.
JPMorgan Chase (NYSE: JPM)
- JPMorgan Chase (NYSE:JPM)
- Price: $159.86 (as of close Sep 13, 2021)
- Market Cap: 477,686,515,050
As the largest bank in the United States—with more than $3 trillion in assets—there’s no question that JPMorgan deserves a place on this financial stocks list. The company offers a broad range of products and services to its customers, including consumer and investment services.
Like all banks, JPMorgan’s business took a hit during the pandemic, but the bank has begun to bounce back and in the second quarter of 2021 the bank beat Wall Street’s consensus earnings estimates.
The company knows that in an increasingly competitive banking industry it needs to stay ahead of its peers and JPMorgan Chase CFO Jeremy Barnum said on the second quarter earnings call that competition is “as intense as ever” and that it is “making the necessary investments to win” in all markets in which it competes.
Coinbase Global (Nasdaq: COIN)
- Coinbase Global, Inc. (NASDAQ:COIN)
- Price: $242.84 (as of close Sep 13, 2021)
- Market Cap: 51,221,984,032
You may have noticed that the financial sector is at an inflection point right now as cryptocurrencies like Bitcoin are gaining attention from governments, private businesses, and investment firms.
One company that’s tapping into this shift is Coinbase, which is the largest platform for buying and selling cryptocurrencies in the United States.
Coinbase has more than 68 million users across the globe that have $223 billion worth of held assets on its platform.
Cryptocurrencies are still in their infancy, but as they gain more acceptance worldwide, Coinbase will benefit from the fast-growing digital currency trend.
Square (NYSE: SQ)
- Square (NYSE:SQ)
- Price: $247.05 (as of close Sep 13, 2021)
- Market Cap: 113,398,290,552
Square is technically a financial technology (fintech) stock, but the company still fits into the broader financial sector. The company makes popular point-of-sale terminals for businesses, as well as its peer-to-peer (P2P) payment app, called Cash.
At the end of 2020, the company had more than 36 million monthly transacting customers, an increase of more than 50% from the previous year. Square is benefiting from a wave of growth among technology companies that offer easy-to-use financial services on smartphones.
Estimates from eMarketer show that proximity mobile spending (when a person uses a smartphone to pay for something at a point-of-sale terminal) will increase from $1,600 annually in 2021 to more than $4,000 by 2025.
PayPal Holdings (Nasdaq: PYPL)
- PayPal Holdings (NASDAQ:PYPL)
- Price: $282.24 (as of close Sep 13, 2021)
- Market Cap: 329,584,767,753
PayPal created one of the most efficient and safest ways to process payments online and the company’s long lead in the online payment space has served it well as it continues to grow.
The company ended 2020 with more than 377 million active customers and it processed a staggering $936 billion in total payment volume for the year.
The company has made a few key acquisitions recently, including snatching up Zettle and Honey, in order to expand its reach. But one of the most significant was its purchase of Braintree in 2013, which gave the company the P2P payment app Venmo.
Venmo has since become an important part of PayPal’s ability to tap into the cashless payments market and now has 70 million active users.
Bank of America (NYSE: BAC)
- Bank of America (NYSE:BAC)
- Price: $39.84 (as of close Sep 13, 2021)
- Market Cap: 344,506,164,888
Bank of America is the second-largest bank in the United States, behind JPMorgan Chase, with $2.3 trillion in assets. But it’s not just its position in the banking sector that makes the company a compelling investment idea.
The company has done a fantastic job of focusing on its digital strategy and has more than 40 million customers regularly using its digital banking services.
If you need just one compelling reason why Bank of America is a top financial stock, consider that Warren Buffett’s Berkshire Hathaway sold off most of his bank stocks in 2020 while snatching up more shares of Bank of America—and now owns nearly 12% of the company’s stock.
American Express (NYSE: AXP)
- American Express (NYSE:AXP)
- Price: $159.48 (as of close Sep 13, 2021)
- Market Cap: 128,261,220,120
American Express is a global payments and travel company with a massive reach. At the end of 2020, the company had nearly 70 million cardholders around the world.
Unsurprisingly, the company’s business suffered during the earliest parts of the pandemic, but it has since bounced back.
American Express’s revenue jumped 33% in the second quarter of 2021 and the company’s earnings soared 865% (the huge percentage increase was a result of earnings drying up in 2020).
And the company is expecting more bright days ahead. American Express CEO Stephen Squeri said that even with uneven recovery in countries around the world, the company is “increasingly optimistic that the momentum we’ve generated will continue,” particularly in the United States.
Capital One Financial Corporation (NYSE: COF)
- Capital One Financial (NYSE:COF)
- Price: $154.39 (as of close Sep 13, 2021)
- Market Cap: 70,900,861,307
Capital One offers its customers an array of financial products, from credit cards to investment products, and the company operates in the U.S., U.K., and Canada.
The company deserves a spot on this list because its recent growth has helped spur investor interest in Capital One’s stock. The company’s share price has skyrocketed more than 120% over the past 12 months (as of Sept. 9, 2021) and the company’s recent quarterly performance indicates that the bank is on a growth streak.
The company beat analysts’ consensus earnings and revenue estimates in the second quarter, with sales increasing 12% year-over-year.
The bank is also focused on using technology to continue expanding its business and Capital One CEO Richard Fairbank said recently that “Our modern technology is powering our current performance and setting us up to capitalize on the accelerating digital revolution in banking.”
Financial Stock ETFs
If you don’t feel comfortable sifting through the stock market to find individual stocks to invest in, then you may want to consider buying a financial stock exchange-traded fund (ETF).
These funds will allow you to invest in a basket of stocks that track an index. This allows you to have exposure to the broad financial sector without having to worry about the volatility that can come with owning individual stocks.
There are many financial stock ETFs to choose from, but researching these top funds would be a good place to start: SPDR S&P Insurance ETF (KIE), SPDR S&P Capital Markets ETF (KCE), and the Financial Select Sector SPDR Fund (XLF).
Frequently Asked Questions
Here are some of the most frequently asked questions about financial stocks.
What is the best financial stock to buy now?
Many of the companies on this financial stock list have the potential to be good long-term investments. But the best-performing financial stocks listed here are PayPal and Square, which have returned 223% and 183% over the past three years, respectively.
What is a finance stock?
Finance stocks can include companies that are banks, insurance companies, and even some technology companies that offer financial services.
What’s the best bank stock to buy?
The top-performing bank stock on this list is Capital One, which has gained 60% over the past three years.