Investing in financial stocks can be extremely lucrative if you know which financial stocks to buy. With artful research and creative financial strategies, many investors can find stocks that will bring impressive returns and provide plenty of financial security.
Take the time to understand a company’s financial statements, management decisions and goals before investing if you want maximum bang for your buck. It is vital to do so at this time, considering the bear market we experienced this year.
Bank stocks took a hard hit after an encouraging 2021. One issue is that banks are closely tied to the conflict in Ukraine. In response to the crisis, loan growth has slowed down. Additionally, stock prices overall have been on a free fall since the start of 2022. Although the markets may seem unpredictable, bank stocks remain undervalued. The Federal Reserve is set to increase interest rates to meet its inflation goal of 2%, which sets up banks for increased earnings.
To help you stay informed and prepared, we have a hand-selected mix of the best financial stocks to buy in 2023 that should not be overlooked. By thoroughly researching these options, you can play it safe while potentially earning impressive returns in an uncertain future market. Below is our list of the ten best financial stocks to buy in 2023.
|FITB||Fifth Third Bancorp||$32.80|
|FRC||First Republic Bank||$119.68|
Toast (NYSE:TOST) has developed a cloud solution for restaurants that helps them run their business smoothly. Due to the pandemic, it suffered through some of its worst years in 2020 and 2021. However, now things are getting back to normal, and recent financial results confirm this.
The company’s numbers look promising, with a 55% rise in revenues year-over-year after Q3, and adjusted losses going down to $98 million from $254 million last year. The company also upgraded its outlook for the fourth quarter. Now, revenue is expected to be between $730 million and $760 million against a consensus analyst forecast of $725 million.
However, this solid performance is not reflected in the markets. The stock is down over 50% in the year thus far. Investors are still cautious concerning the recovery of the restaurant market, which is reflected in Toast’s share price. However, in many countries, things are pretty normal. So, the stock can come back next year, making it one of the best financial stocks to buy. Shares are now being traded at a favorable price. If you’re thinking of investing in the next comeback story, now might be the right time to do so.
SoFi Technologies (SOFI)
This year, SoFi’s (NASDAQ:SOFI) stock price has taken a plunge. Shares are down more than 70% despite it being a great year for the fintech company. It completed the purchase of Golden Pacific Bancorp earlier this year, which means SoFi Technologies is now well and truly a bank. It no longer relies on third-party financial institutions to issue loans and provide deposit services. That puts it in a different league from other fintech players.
In addition, SoFi’s personal loan business is increasingly profitable. According to recent reports, the success of that sector has allowed the firm to beat consensus expectations consistently. It also allows the online bank to circumvent the broader macroeconomic environment, despite mixed performance in other areas of its portfolio. This is great news for SoFi’s many customers and employees, who eagerly await the end of the student loan repayment pause to end.
With its strong overall performance, SoFi appears to be on its way to a bright future. Furthermore, when the moratorium on student loan payments ends, SoFi will have back one of its best-performing segments. For these reasons, SoFi is one of the best financial stocks to buy.
Intuit (NASDAQ:INTU) experienced impressive growth in the last fiscal year, with total revenue increasing by 32%, excluding the acquisition of email marketing provider MailChimp. It’s a testament to their business chops and financial acumen that they’ve come out on top in this difficult economic climate. Along with that comes premium stock prices. However, it’s for a good reason. Intuit remains competitive even when times are tough for its customers – small businesses and consumers who have been especially hard hit by current events.
Intuit’s software tools have become indispensable resources, especially as belts are tightened amid an economic downturn. As a leader in tax software (Turbo Tax) and small business management solutions (QuickBooks, MailChimp), Intuit has been able to continue the positive trajectory of its small business segment. The performance comes despite budget cuts – with CFO Michelle Clatterbuck recently sharing the expectation that this sector will grow by an impressive 20% in fiscal 2023.
From DIY-ers filing their taxes using Turbo Tax to businesses taking advantage of industry-leading fiscal solutions through QuickBooks and marketing assistance with MailChimp, Intuit possesses a robust operating model. Many of the segments are recession resistant. People need to manage their finances and file their returns. Growth in subscriber numbers might slow down for a couple of quarters. But the existing consumer base is incredibly sticky. The latest quarterly numbers show that revenue shot up 29%, despite a tough operating environment. That kind of performance is rare to find in the current market.
Lemonade’s (NYSE:LMND) entry into the insurance market is a major disruption to the industry – and with it comes great advantages for its technology and customers. Its use of machine learning provides the potential for a more accurate assessment of underwriting policies. It allows Lemonade to be competitive in pricing compared to traditional systems. Furthermore, the innovative approach has won them fans in the form of customers who enjoy their product and rave about their customer service. It is an advantage that takes time, investment and dedication to acquire. With these elements combined, Lemonade has placed itself as a major player in the market, ready for whatever may come next.
Lemonade is proving its value by focusing on the in-force premium (IFP) as its top-line metric instead of revenue alone. The success in achieving high growth goals has resulted in a 76% increase in IFP since last year, with a 35% boost in premium per customer and a 30% jump in customer count. Moving forward, the company is committed to focusing on profitability. Despite the risk of utilizing machine learning to price policies, Lemonade is certain to offer an improved product. At the same time, it is consistently growing its market share.
Lemonade has taken a similar turn as much of the tech industry, seeing a big fall in market cap this year. It’s trading at very attractive valuations and is worth keeping an eye on. Although it is a bit risky, it deserves a place on this list of financial stocks to buy because of its disruptive quality.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) is one of the largest and most impressive banks in the United States. It offers an attractive risk-reward prospect for investors, making it an enticing option for those with high returns in mind.
Wells Fargo has plans to make cost cutting a key focus area going into 2023 – this could be a major source of competitive differentiation between them and others. On top of this, the eventual abolition of its asset cap imposed by the Federal Reserve presents another significant positive development. It can help attract more attention to the company come 2023.
Wells Fargo & Co. is slightly more attractive than other megabanks because it relies more on its consumer banking and lending arm than the investment banking business. It might not be by design, but the operating model for WFC is ideal in the current environment. In a turbulent economic climate, consumer banking has emerged as the saving grace for banks. While investment banking activity falters and markets continue to be bearish, people remain willing to take out loans with rising interest rates that generate much-needed income for financial institutions. Therefore, heading into 2023, Wells Fargo & Co. is in a great position.
Despite a strong bearish market sentiment, now may be the time to take advantage of Citigroup’s (NYSE:C) underdog status. The current price offers significant upside potential regardless of what happens with Citi’s planned divestitures. The execution risk shouldn’t stop sophisticated investors willing to give them a chance and look past the recent roadblocks. It’s up to Citigroup to prove they have what it takes to get back on track, but the big payoff could be well worth it.
Citigroup’s difficulties in 2022 reflect a challenging year of business operations. Unfortunately, its stock has plummeted close to 30%. Its value at the present low point has become a cause for further concern. The banking giant unveiled a multi-year transformation plan to improve its fortunes, yet the results were impaired due to several unforeseen obstacles encountered along the way. These delays were costly, allowing write-downs that affected contract invoicing and other financials. Moreover, Citigroup is contending with certain regulatory issues, while still operating under the looming threat of higher capital requirements.
On the bright side, the investment bank is undergoing a major revamp of its consumer banking operations, setting the stage for an increasingly streamlined and profitable institution. By winding down or selling 14 international units – including Citibanamex in Mexico with remarkable returns – the bank will be able to hone in on core strengths such as investment banking, corporate banking and wealth management services. Making the business model more nimble is ideal, especially in a volatile market. It sets up Citigroup nicely for 2023 and beyond, sealing its fate among financial stocks to buy.
Fifth Third Bancorp (FITB)
Fifth Third Bancorp (NASDAQ:FITB) is an impressive regional bank with increasing reach, strong finances and impressive products. Their expanding presence in the Southeast region ensures more customers can access their high-quality banking services, which include retail and commercial banking, consumer lending and asset management. The bank’s solid footing also provides a great foundation for outperformance when market conditions become turbulent – as they always do.
Furthermore, Fifth Third has seen improving credit quality over the past few years, which will protect them during an economic recession. The pandemic’s dramatic economic downturn left banks facing a critical test: evaluating and preparing for the heightened risk of loan defaults. At Fifth Third Bancorp, management shone under pressure. It did exceedingly well by accurately predicting potential losses while prudently setting aside reserves to cover them. The accomplishment is worthy of praise in uncertain times. That performance is carrying through even after the pandemic. Moreover, their technological advancements have not been appreciated by the market yet.
All these factors make Fifth Third Bancorp a great choice for investors looking to buy financial stocks for long-term growth potential.
First Republic Bank (FRC)
First Republic Bank (NYSE:FRC) is a great example of how excellent customer service can build strong and lasting relationships. Having been in operation for the past four decades, their commitment to providing private consumer and business banking and private wealth management in New York and California has resulted in hard-earned customer loyalty.
First Republic Bank did not do well this year like other financial stocks. Part of the reason is the wider economic downturn. However, Co-CEO James Herbert taking a leave also played a part. However, the company recently reported a revenue increase of 16.9% YoY, and net income rose 21%. Therefore, there is a feeling abound that the stock has been harshly treated.
Over the last four quarters, First Republic Bank has consistently posted healthy earnings. They far exceeded even the most optimistic of analysts’ predictions. This extraordinary performance should not be taken lightly – it is a testimony to the incredible management, leadership and competent staff that has enabled this financial institution to stand out as a leader in its field. With this consistent success over such an extended period, First Republic Bank will reap greater rewards. Investors are sure to take notice and respond accordingly.
Signature Bank (SBNY)
Signature Bank (NASDAQ:SBNY) is a prominent commercial banking institution with assets valued at $114.47 billion in the third quarter of 2022. Despite recent market turbulence caused by FTX bankruptcy and cryptocurrency contagion anxiety among some investors, shares are attractive as experts anticipate a Federal Reserve rate increase to factor in future conditions.
Signature Bank is certainly conscious of the FTX debacle. (If you want to take a deep dive into the collapse, here is a great piece from Luke Lango that gives a great blow-by-blow account. Louis Navellier has you covered if you want to know how to navigate the future of crypto investing, particularly in the case of tokens.) It decided to end digital asset-associated deposits, as they only had a deposit relationship with FTX, citing volatility due to recent events. This news sent ripples through the marketplace, leaving executives and enthusiasts alike wondering what’s next for digital assets.
Signature Bank has long been at the forefront of fintech innovation. It offers a revolutionary payments platform tailored specifically to crypto exchanges and clients. Operating 24/7, Signet – as it’s called- provides users with real-time payment solutions, allowing instantaneous transactions within their portfolios. As an added benefit of using this service, customers can place large non-interest-bearing deposits into Signature bank accounts, further driving global financial developments.
In 2021, Signature had an impressive year following its foray into crypto services. Unfortunately, market developments have since caused the company to scale back operations and reassess its situation. Most notably, the collapse of FTX sent ripples throughout the industry as it spread contagion to other prominent players in this sector. However, despite suffering losses along with many others, Signature escaped relatively unscathed. It did not possess substantial deposits connected with FTX, and further streamlining the business certainly can’t hurt.
Visa (NYSE:V) has undergone a remarkable transformation; From its humble beginnings as an ordinary payments network, it is now a powerful force in the rapidly growing field of financial technology. Fintech’s development and adoption have surged during these challenging times – indeed, Visa stands at the heart of this revolution.
Unlike several other financial stocks investors are looking to buy, Visa did well this year. The stock is down close to 5%. This news will not stop the presses. However, the price movement becomes notable when you compare it to the S&P 500, which is down almost 20% this year.
Visa helps to power commerce around the world with its innovative payment network. In 2022, it propelled over $14 trillion in global sales. In addition, the payment processing company facilitated more than 250 billion transactions across over 80 million merchants worldwide. Boasting an impressive 3.9 billion cardholders, Visa continues to lead the way in digital payments processing networks on a grand scale. Despite a tough 2022, it still managed top-line growth of 19% in its latest quarter. In addition, Visa’s earnings outlook assumes ‘no recession’ and relieved investors spooked by the markets. Heading into 2023 puts Visa in a great position.
On the publication date, Faizan Farooque 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.