Of late, the finance sector has been putting up an impressive performance, with some monthly volatility. The United States’ economic health, on which this sector is largely dependent, has been displaying steady improvement with increasing real GDP numbers, declining unemployment rate, improving consumer spending and stabilizing housing market.
Further, the likelihood of another rate hike in the near future continues to dominate the headlines. A stronger-than-expected U.S. payroll data released last week has raised expectations for the Fed interest rate hike in September, third this year. Except REITs, the other Finance sector constituents — banks, brokerage firms, asset managers and insurers — usually benefit from a rising rate environment. Riding on higher rates and improved lending margins, along with the lesser regulations under the Trump administration, the finance sector has emerged triumphant. The S&P 500 Financials (Sector) Index has gained around 18.5%, outperforming S&P 500 growth of 15.9%, over the past year.
VIDEO While escalating trade-war tensions between the United States, China and the European Union continued to dampen investor sentiment, strong economic data on the domestic front largely mitigated this. Overall, continuation of structural changes, with investments in newer technologies, and a rising rate environment keep the prospects for financial stocks bright. While September is generally considered the worst performing month for the stock market, here we bring a handful of finance stocks that are expected to generate good returns, supported by the above-mentioned catalysts. Selecting the Winning Stocks We have taken the help of the Zacks Stock Screener to shortlist financial stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy), and a VGM Score of A or B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank of 1 or 2, offer the best upside potential. To narrow down the list, we have taken stocks with market capitalization of more than $5 billion and positive estimate revisions, over the past 60 days. Here are the top five financial stocks that meet the criteria: Northbrook, IL-based The Allstate Corporation ( ALL - Free Report) provides property and casualty insurance, and life insurance businesses in the United States and Canada. Zacks Rank: #1 VGM Score: B Market Cap: $34.6 billion Change F1 Est. (8 weeks): 5.6% You can see the complete list of today’s Zacks #1 Rank stocks here . MetLife, Inc. ( MET - Free Report) , headquartered in New York, is engaged in the insurance, annuities, employee benefits, and asset-management businesses. It operates through five segments — the United States, Asia, Latin America, Europe, the Middle East and Africa; and MetLife Holdings. Zacks Rank: #2 VGM Score: B Market Cap: $45.5 billion Change F1 Est. (8 weeks): 3% Lazard Ltd ( LAZ - Free Report) , headquartered in Hamilton, Bermuda, operates as a financial advisory and asset-management firm globally. Zacks Rank: #2 VGM Score: A Market Cap: $5.95 billion Change in F1 Estimate (8 weeks): 3.2% Rosemont, IL-based Wintrust Financial Corporation ( WTFC - Free Report) operates as a financial holding company in the Chicago metropolitan area, southern Wisconsin, and northwest Indiana. Zacks Rank: #2 VGM Score: B Market Cap: $5.1 billion Change in F1 Estimate (8 weeks): 2.9% Jacksonville, FL-based Fidelity National Financial, Inc. ( FNF - Free Report) provides title insurance, technology, and transaction services to the real estate and mortgage industries in the United States. Zacks Rank: #2 VGM Score: B Market Cap: $11 billion Change in F1 Estimate (8 weeks): 1.4% The Hottest Tech Mega-Trend of All Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>