The big story in financials at the moment is the fact that some of the top global banks are looking at $6 billion in fines for manipulating the foreign exchange markets for their own gain.
Yes, the big banks have been playing fast and loose with other people’s money. And they will pay a “‘cost of doing business” fine and move on. Shocker.
From an investment perspective, the big banks are still not in a position where investors should be putting any money to work right now. There are too many other opportunities that don’t carry these risks of yet another scandal and yet more legal fees and penalties hurting earnings.
My Portfolio Grader stock-rating tool analyzes stocks based on fundamentals and strong buying pressure. The best of these stocks get an A rating — which means that Portfolio Grader rates them as a “strong buy.”
If you’re looking for spots to make a move now, I’ve identified seven A-rated financial stocks that are primed for growth. These financial stocks can be found in three sectors — insurance, REITs and yes, banks.
Here are seven A-rated financial stocks to buy now:
7 A-Rated Financial Stocks to Buy Now: China Life Insurance Company Ltd. (ADR) (LFC)
Sector: Insurance
YTD Performance: +28.3%
Here’s the great thing about the insurance sector — insurance companies are essentially big banks that make their money off of their investment portfolios.
Since some of this money has to be liquid in case they have to pay out on a catastrophic event, a good chunk is kept in cash or Treasuries. As the dollar declines, rates rise and insurance companies make more money on their piles of cash. With the Federal Reserve vowing to raise rates this year, again, it’s bullish for insurance firms.
China Life Insurance Company Ltd (NYSE:LFC) has another great growth kicker — it sells life insurance in China. Already 177 million members strong, LFC is a great play on the rising middle class in China.
LFC sells not only individual policies but group life and supplemental medical insurance. As corporations begin to offer benefits to employee pay packages, LFC stands to benefit mightily.
LFC’s stock is up nearly 90% in the past 12 months.
7 A-Rated Financial Stocks to Buy Now: Markel Corporation (MKL)
Sector: Insurance
YTD Performance: +13.2%
Markel Corporation (NYSE:MKL) is a unique specialty insurer both in the U.S. and across the globe. Technically, it describes itself as “a financial holding company serving a variety of niche markets” simply because each of its units represents a separate entity, and not all of them are insurance-based.
MKL insures everything under the sun, from racehorses to cattle to health clubs and oil fields. It also has a reinsurance arm that operates in high-risk sectors and countries.
Net first-quarter income doubled this year compared to the same quarter of 2014, and overall first-quarter income was up 20% versus a year ago.
The stock is up 13% in 2015 — and new acquisitions promise more upside in coming quarters.
7 A-Rated Financial Stocks to Buy Now: PartnerRe Ltd (PRE)
Sector: Insurance
YTD Performance: +16.4%
PartnerRe Ltd (NYSE:PRE) is a global reinsurance company serving more than 2,000 clients in 150 countries. Reinsurers are insurance companies for insurance companies — it’s basically a way for an insurance company to offload some of the underwriting risk it may encounter with a client.
Although the market meltdown decimated the reinsurance market in 2008, reinsurers are coming back into play and are gaining momentum as insurers look to mitigate as much risk as they can until the markets are more stable.
PRE is particularly attractive now that Italy-based investment company Exor SpA (OTCMKTS:EXORF) has begun talks to acquire PRE as part of its larger strategy of building an interest in growing sectors of the U.S. and European economy.
Exor has offered $137.50 a share, but PRE is still holding out — so the offer may increase yet again. AXIS Capital Holdings Limited (NYSE:AXS) has already put in a lower bid that PRE shareholders will consider soon.
What’s more, at this point PRE is still trading in the low to mid-$130s, so the stock isn’t valued at its Exor premium yet. Whether the buyout works, it’s clear that PRE is on many companies’ short list of valuable reinsurers — and a prize for anyone’s portfolio.
7 A-Rated Financial Stocks to Buy Now: Health Care REIT, Inc. (HCN)
Sector: REITs
YTD Performance: -6%
Real estate investment trusts (REITs) are structured so that they must return 90% of their income to investors, so they are always attractive to income investors. And depending on the market cycle can be very attractive to growth investors as well.
Right now, there are some specific REITs that promise growth and income.
Health Care REIT Inc (NYSE:HCN) is in a perfect spot for growth. It specializes in senior housing and assisted living and care facilities, which is one of the biggest long-term trends in the U.S. for the next 30 years.
The stock is delivering a 4.6% dividend yield, which is like getting a 4.6% head start on most other growth stocks. It hasn’t begun its move up yet, so now is a good time to get in before the herd drives up the price and drives down the dividend.
7 A-Rated Financial Stocks to Buy Now: UDR, Inc. (UDR)
Sector: REITs
YTD Performance: 6.8%
UDR Inc (NYSE:UDR) specializes in renting upscale apartments in desirable cities across the U.S. This is a growing market as younger professionals choose the convenience of renting near their jobs rather than trying to get a mortgage in a far-flung suburb and commute.
The real estate bust of 2008 has had serious repercussions with Generation X and Millennials when it comes to home ownership. And UDR is taking advantage.
The REIT kicks off a 3.4% dividend and the stock is up 20% in the past year. But that is just the beginning.
7 A-Rated Financial Stocks to Buy Now: BBVA Banco Frances S.A. (ADR) (BFR)
Sector: Banking
YTD Performance: +27.8%
The first pick of my two picks in the banking industry may be counterintuitive since this country’s financial sector was in disarray a year ago. But it was more a problem with the government than the financial industry itself — and this bank is on a tear that will last as the country gets back to normal.
BBVA Banco Frances S.A. (ADR) (NYSE:BFR) is one of the top Argentine banks. And despite the problems that Argentina has had with its foreign debt, BFR is doing very well. In fact, the international debt crisis only made BFR’s stock oversold.
Its fundamentals are solid and investing service Benzinga just rated BFR one of its top mid-cap stocks in the foreign-regional banking industry.
The stock is up 96% in the past year, with more to come as Argentina gets its financial house back in order.
7 A-Rated Financial Stocks to Buy Now: Bank of the Ozarks Inc (OZRK)
Sector: Banking
YTD Performance: 14.7%
Bank of the Ozarks (NASDAQ:OZRK) is a classic U.S. regional bank that avoided all the mess of 2008 and continues to post strong numbers and grow its base the traditional way banks have always done business.
Started in 1903 in a small town in Arkansas, OZRK has growing into a quality regional bank with 166 offices in Arkansas, Georgia, North Carolina, Texas, Florida, Alabama and South Carolina.
OZRK’s real story is its growth. While many other banks have trimmed their sails and just tried to keep earnings solid — as well as their balance sheets — OZRK has been expanding. This has been a risky strategy since the U.S. economy hasn’t seen much recovery in smaller regional markets and the real estate market hasn’t rebounded as quickly as expected.
But things have been improving and that has helped OZRK keep its growing footprint profitable. And once the Federal Reserve raises interest rates, it will certainly help OZRK’s operating capital as its large Treasury holdings increase in value.
Bank consolidation is over and solid regional banks like OZRK have a lot of opportunities to spread into markets where the big national banks would go in the past, or buy up the competition.
Now solid regional banks have big futures.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
