The finance sector’s performance depends on the health of a nation’s economy. Though the Fed’s accommodative-monetary policy, political and economic concerns related to Brexit, tensions arising from unresolved U.S.-China trade-deal negotiations, the U.S. government shutdown and expectations of a global economic slowdown have hampered economic activities in the beginning of the year, continued domestic economic growth, sturdy equity markets and increasing corporate earnings owing to tax reforms provided respite.
Further, the recent phase-one U.S.-China agreement and the Fed’s announcement of no change in interest rates, following three interest-rate cuts this year, have revived optimism. Also, the central bank signaled an extended pause on interest rates based on the sustainability of the U.S. economic growth. In addition, fundamental strength of the companies in the finance sector is expected to support its performance in the upcoming period. Finance firms are making efforts to streamline operations and expand business (organically and inorganically), in a bid to diversify footprint and revenue base. In fact, lower corporate tax rates, along with the easing of stringent regulations, are likely to keep supporting profitability. Moreover, several finance sector companies are undertaking measures to align their businesses for technology-driven clients. These companies are spending substantially on technology to upgrade and add advanced features. This is expected to trim costs and improve operating efficiency over the long term. Given the impressive financial performance of the sector till date, along with a healthy consumer-spending environment, the time is apt for investors to make profitable investment decisions. The S&P 500 Financials (Sector) Index has gained 29.4%, so far this year, compared with the S&P 500’s rally of 27.4%. Also, the Zacks Finance Sector has witnessed a rise of 18.2% during the same time period. Picking the Potential Winners The above-mentioned factors are expected to keep supporting the finance sector in the upcoming period as well. Nonetheless, investors should keep an eye out for issues faced by the sector as these could adversely impact bottom-line growth. With the help of our Zacks Stock Screener, we have shortlisted five stocks, which carry a Zacks Rank #1 (Strong Buy) or #2 (Buy), have outperformed the finance sector year to date, with market capitalization of more than $2 billion. Further, these stocks have a VGM Score of ‘A’ or ‘B’. Using our new style score system, the VGM Score rates each stock on the combined weighted styles, helping identify the ones with the most attractive value, highest growth, and most promising momentum, across the board. The combination of all three styles that goes into the VGM Score makes it one of the most comprehensive and best performing indicators to use with the Zacks Rank. Texas-based Hilltop Holdings Inc. HTH is banking and financial products and services provider in the United States. Zacks Rank: #2 VGM Score: B Price Gain YTD: 44.3% Market Cap: $2.31 billion Minneapolis-based Ameriprise Financial, Inc. ( AMP Quick Quote AMP - Free Report) is a provider of various financial products and services to individual and institutional clients in the United States and worldwide. Zacks Rank: #2 VGM Score: A Price Gain YTD: 60.3% Market Cap: $21.91 billion Wisconsin-based MGIC Investment Corporation MTG is a provider of private mortgage insurance, other mortgage credit risk management solutions, and ancillary services to lenders and government sponsored entities in the United States. Zacks Rank: #2 VGM Score: B Price Gain YTD: 38.3% Market Cap: $5.04 billion Bermuda-based Essent Group Ltd. ESNT is a provider of private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Zacks Rank: #2 VGM Score: B Price Gain YTD: 58.3% Market Cap: $5.3 billion California-based First American Financial Corporation FAF is a provider of financial services, including Title Insurance and Services, along with Specialty Insurance. Zacks Rank: #2 VGM Score: A Price Gain YTD: 37.6% Market Cap: $6.85 billion Zacks Top 10 Stocks for 2020 In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020? These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>