3 Stocks Worth Looking Into From The Financial Sector
Yasir is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The banking industry is still one of the best sectors to invest in. Even though the industry can face extreme highs and lows along the way, many observers believe that the sector is stable compared to investing in alternative markets. Since its downfall in 2009, the banking industry has been rebounding, with investment banks showing impressive growth over the past few years. Also, most of these investment banks believe that there are several good years ahead, with expected U.S economic growth as one of the contributing factors.
However, the economy has not performed as expected, with growth of slightly over 2% in the past quarters and the unemployment rate unchanged. As a result, investor confidence has not been great. That's why many investors found it surprising for the financial sector to shine in the previous year.
Investing in the financial sector is still somewhat risky, although many claim that the investing in the industry means long-term stability, similar to commodities like gold. Here are the 3 stocks, in the financial sector, which you should consider looking into in 2013.
Goldman Sachs (NYSE: GS) did quite well in 2013. The company shone in the previous year, exceeding many analysts' expectations. Q4's earnings report showed a net profit increase to $2.9 billion. This increased EPS to $5.60, a significant improvement from the same quarter in 2011. The earnings for the full year came out to $7.5 billion which showed an increase of over 70%, compared to the $4.4 billion earnings in 2011.
Currently trading at its 52-week high, Goldman Sachs' major strength has been in Investment Banking as the division, along with Investment Management, has shown growth. It is clear that Goldman Sachs still attracts some of the brightest and smartest individuals in the industry.
Another reason why Goldman's stock has showed a tremendous increase is the sale of its stake in the ICBC. This not only helped the company generate around $1 billion in cash inflow, but will also help Goldman in improving its capital ratio as capital requirements get tougher with Basel III's capital requirements.
JPMorgan Chase (NYSE: JPM), one of the world's largest asset management firms, is another strong bank in the financial industry, which is expected to grow further in 2013. After the "London Whale" incident, which resulted in a loss of $6 billion, JPMorgan's financials still look strong and it seems like if many have already forgotten about the loss after the latest earnings report.
The latest report showed that revenues increased by around 10% for the quarter, while full-year profit reached another record at more than $21 billion. Apart from that, the firm's EPS of $1.40 also beat expectations by nearly 16%. Jamie Dimon, JPMorgan's chairman and CEO, recently said that all the divisions performed exceptionally well in the quarter, with strong growth expected further in 2013.
JPMorgan is seen as one of the most valuable banks in the industry, with a market cap of $184.9 billion, compared to Wells Fargo's valuation of $184.2 billion. Many analysts now believe that JPMorgan will outperform Wells Fargo, since JPMorgan's share price has already gone up by over 10% this year. JPMorgan still looks like an undervalued opportunity, trading at 90% to 95% of its valuation, while other firms in the financial industry are trading over 100% of their valuations.
Wells Fargo (NYSE: WFC) has also been making headlines. Wells Fargo is one of the largest banks in the world and is set for long-term growth for patient investors. Still one of the biggest banks in the world, Wells Fargo is just behind JPMorgan in terms of Market Capital.
The company's recent earnings report showed a record quarterly profit of $5.1 billion, which shows an increase of 24% compared to 2011's last quarter. Also, the total profit for the year showed an increase of 19% to $18.9 billion, compared to the year before. Meanwhile, an EPS of $0.91 also managed to beat the $0.89 expectation of analysts.
Wells Fargo is certainly seen as a brilliant long-term investment opportunity, with the firm expecting further growth over the next couple of years. One of Fargo's strengths is the recovery in the housing sector, with the company being able to lend smartly, compared to its competitors. Unlike others, Wells Fargo is very picky on investments. It still looks at a greater number of smaller investment opportunities before jumping on a sole big opportunity. Still the largest mortgage lender in the U.S, Wells Fargo has been stable since a couple of years, avoiding any financial blunders. Wells Fargo, positioned to take advantage of the housing recovery, is financially well diversified in different divisions of the company, with all areas relatively stable and performing well, including mortgage lending and insurance.
Even though the financial sector looks relatively stable, there are doubts over some of the biggest banks in the industry. Companies like Citigroup and Bank of America are relatively risky stocks, which have gone through a wild ride recently. However, other investment opportunities in the sector, including JPMorgan and Goldman Sachs are looking to shine in 2013 after exceeding expectations and performing quite well in the previous year. Wells Fargo is another company in the industry looking to show strong growth in upcoming years, and it might just be the ideal long-term investment opportunity for patient investors.
yasirrfc has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!