I’m currently reading a book about an American private equity firm buying a Chinese bank and turning it around at a time when China was still growing into its role as the world’s second-largest economy. It’s a fascinating read. It’s got me thinking about financial stocks.
The markets are generally overpriced right now, if not historically so. The financial services industry strikes me as an area where I might find some relative value.
In Monday’s trading, there were seven financial stocks in Barchart’s Top 100 Stocks to Buy. The average rank of the seven was 40, with Robinhood Markets (HOOD) in the top spot in third position.
However, if you include Dave (DAVE) and Futu Holdings (FUTU), which my Barchart screen of finance-related stocks in the top 100 didn’t seem to want to include, the average increases to just under 45.
The betas of the nine stocks range from a high of 5.95 for Pagaya Technologies (PGY) to a low of 0.29 for X Financial (XYF). The average of the nine is 2.45, suggesting that most of these stocks are primarily for aggressive investors or those who like to dabble in options, where volatility is often your friend.
Based on the nine finance stocks in the top 100, I see several that could be excellent long-term investments. Here are my top three preferences by heat: mild, medium, and hot.
Of the nine financial stocks from yesterday’s top 100, Deutsche Bank (DB) had the second-highest market cap at $71.3 billion — HOOD was the top market cap at $95.9 billion — but the highest annual net income at $4.70 billion. Yielding a reasonable 1.9%, which is higher than the S&P 500 average of 1.2% as of Aug. 25.
It’s been a long time since I’ve considered the pros and cons of the German bank, which has had its fair share of ups and downs in recent years.
I can see from the 12 analysts that cover DB stock that there isn’t a consensus about the bank’s near-term future. Of the 12, seven rate it a Buy (3.83 out of 5), with a 12-month target price of $29.77, well below its current share price…
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