Finance sector has rallied 21.3% so far this year, marking a significant rebound from the disappointing 2018 performance, wherein the sector had recorded a decline of 14.3%. Also, the sector has underperformed the S&P 500’s growth of 29.9% over the same time period amid the Federal Reserve’s three interest rate cuts. It is well known that the finance sector benefits from higher rates. Thus, interest rate cuts had an adverse impact on the sector’s performance (except REITs) to some extent. However, the indication of no further cuts is likely to act as catalyst for the next year. Further, the U.S. economy is showing no signs of slowing down despite fears of the same at the beginning of the year. It marks the 11th year of U.S. economic expansion. This, along with lowest unemployment rate since 1969 and positive consumer sentiments, will likely continue supporting the sector’s financials. The Fed expects the economy to grow at 2% in 2020.
Furthermore, easing of some of the macroeconomic concerns like U.S.-China trade war and Brexit are likely to improve the sector’s performance going forward. These positive developments have resulted in steepening of the yield curve, even though there were concerns related to flattening/inversion of the yield curve at the start of the year. Thus, the industry is likely to benefit from higher market interest rates.
Moreover, finance companies are resorting to acquisitions with an aim to fortify businesses, expand geographically, improve revenue mix and derive cost synergies. While companies’ efforts to tap technological advancements will brighten prospects, huge investments are expected to keep the expenses elevated in the near term. Also, firms are restructuring and streamlining businesses and undertaking cost-savings initiatives to improve operating efficiency. Picking the Potential Winners Based on the above-mentioned factors, it will be wise to invest in finance stocks at present with strong potential. With the help of the Zacks Stock Screener, we have shortlisted five such companies, which have outperformed the sector year to date. These firms carry a Zacks Rank #2 (Buy) or better. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Further, these stocks have a VGM Score of A or B. Using our 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. Moreover, these firms’ 2020 earnings estimates have witnessed upward revisions in the past 60 days. Also, the bottom line is expected to grow next year. These companies have a market capitalization of more than $1 billion. Year To Date Price Performance
Here are the five companies worth betting on:
San Diego, CA-based Encore Capital Group, Inc. ECPG is a financial consumer loans company with a market capitalization of $1.1 billion. Currently, it carries a Zacks Rank #2. VGM Score: A Price Change YTD: 56% Estimate revisions for 2020 in past 60 days: 3.1% Earnings growth rate for 2020: 8.1% Headquartered in Milwaukee-WI, MGIC Investment Corporation MTG is one of the largest private mortgage insurers in the United States. This Zacks #2 Ranked company’s market capitalization is $5 billion. VGM Score: B Price Change YTD: 37.4% Estimate revisions for 2020 in past 60 days: 1.1% Earnings growth rate for 2020: 2.1% Baltimore, MD-based T. Rowe Price Group Inc. TROW is a global investment management organization with a market capitalization of $28.6 billion. Currently, it carries a Zacks Rank #2. VGM Score: B Price Change YTD: 36% Estimate revisions for 2020 in past 60 days: 1.7% Earnings growth rate for 2020: 4.6% Jones Lang LaSalle Incorporated ( JLL Quick Quote JLL - Free Report) is a real estate stock with a market capitalization of $8.9 billion. Currently, this Chicago-based company flaunts a Zacks Rank of 1. VGM Score: B Price Change YTD: 36.4% Estimate revisions for 2020 in past 60 days: 6.9% Earnings growth rate for 2020: 3.7% Philadelphia, PA-based Radian Group Inc. RDN is an insurance company with a market capitalization of $5.1 billion. Currently, it carries a Zacks Rank #2. VGM Score: B Price Change YTD: 53.7% Estimate revisions for 2020 in past 60 days: 2.9% Earnings growth rate for 2020: 2% 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 >>