Financial firms serve as the backbone of the economy, providing essential services from lending and investment management to risk management and payment processing. These companies have benefited from improving market activity and economic fundamentals, so it's no surprise the industry has posted a 10.6% gain over the past six months, nearly mirroring the S&P 500.
Regardless of these results, investors must exercise caution as many firms are sensitive to economic cycles and regulatory changes. With that said, here are two resilient financials stocks at the top of our wish list and one best left ignored.
One Financials Stock to Sell:
Farmer Mac (AGM)
Market Cap: $2.19 billion
Created by Congress in 1987 to build a bridge between Wall Street and rural America, Farmer Mac (NYSE: AGM) provides a secondary market for agricultural and rural loans, helping lenders increase their liquidity and lending capacity to serve rural America.
Why Are We Wary of AGM?
- High debt-to-equity ratio shows the firm carries too much debt relative to shareholder equity, increasing bankruptcy risk
Farmer Mac’s stock price of $206.01 implies a valuation ratio of 11.4x forward P/E. Read our free research report to see why you should think twice about including AGM in your portfolio.
Two Financials Stocks to Watch:
Federated Hermes (FHI)
Market Cap: $3.99 billion
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Do We Like FHI?
- Share buybacks propelled its annual earnings per share growth to 20.6%, which outperformed its revenue gains over the last two years
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Federated Hermes is trading at $54.10 per share, or 11.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Piper Sandler (PIPR)
Market Cap: $6 billion
Tracing its roots back to 1895 and rebranded from Piper Jaffray in 2020, Piper Sandler (NYSE: PIPR) is an investment bank that provides advisory services, capital raising, institutional brokerage, and research for corporations, governments, and institutional investors.
Why Are We Positive On PIPR?
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 25.6% outpaced its revenue gains
- Impressive 13.2% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
- Industry-leading 14.3% return on equity demonstrates management’s skill in finding high-return investments
At $339.19 per share, Piper Sandler trades at 22.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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