U.S. consumer spending is at two-year highs. Consumer confidence remains near 17-year highs. Credit card spending is now above pre-crash levels for the first time in nearly a decade. When two-thirds of your economy is dependent upon consumer spending, these are very good numbers.
And the sector that stands the most to benefit from this upsurge in spending is financials — banks, insurance companies, brokerages, mortgage firms, etc.
That’s why for this final 2017 article, I thought I would share seven ‘Grade A’ financial stocks to buy for 2018 and beyond. These stocks represent a diverse group of financial companies that will do very well as higher interest rates and faster growth take hold in the U.S. economy.
They also demonstrate the fact that opportunities in this sector come in all shapes and sizes.
Texas Pacific Land Trust (NYSE:TPL) manages the land and royalties for oil and gas landowners.
Basically, it’s like a property management company for lands that energy companies want to drill on. They work out the deals and then hold the exploration and production companies to their agreements and then take a cut of the lease payments and royalties on the lands.
A few years ago, this was certainly not a very good space to be in, when energy prices and the global economy were both sucking wind.
But today is the opposite story. And it’s much of the reason TPL is up almost 50% this year. This upturn in fortune is just starting to play out, so there’s plenty left for TPL to tap into.
Lendingtree Inc (NASDAQ:TREE) started as a pioneer in the online mortgage brokering business. But since those days, it has expanded its mission to encompass all manner of online lending.
And the timing couldn’t have been better. Financial technology — aka, fintech — is becoming the fastest growing segment in the financial sector, and TREE has one of the most visible brands in the business.
Many brick-and-mortar banks are trying to remain relevant as new generations of customers are not as interested in traditional banking, and technology is making banking a lot more dynamic and competitive.
TREE is the point of that spear. Up a whopping 238% in 2017, there’s so much untapped potential in an expanding economy this is just a hint at what’s to come.
S&P Global Inc (NYSE:SPGI) is much more than the ratings and index service that many investors have come to known. With the purchase of McGraw Hill Financial Inc, it has transitioned into a financial publishing powerhouse.
Using its size and reputation, it has become one of the leading B2B financial publishers, ratings services and research/analytic firms in the world. It not only provides market intelligence to business and industry but it also helps smaller publicly traded firms support their investor relations pages.
As the markets rebound so will demand for all its services in this space. SPGI has finished the year up nearly 60%, which is a testament to the influence the company has in the financial and industrial markets.
Allstate Corp (NYSE:ALL) started in 1930 when the president and chairman of Sears, Roebuck & Co thought it would be a good idea to sell auto insurance through the mail.
The rest, as they say, is history.
Now, ALL serves 16 million households throughout the U.S., with a full line of property and casualty (P&C) insurance products.
ALL stock is up over 40% this year and the best is yet to come. You see, since insurers hold a lot of cash in liquid investments like U.S. Treasuries, ALL is going to see a nice boost to its investment portfolio as interest rates rise.
That and an expanding economy are good news for this insurer.
Interactive Brokers Group Inc (NASDAQ:IBKR) is a global electronic broker. That doesn’t sound like a unique market to be in since there are scores of brokers around the world.
But IBKR cut its teeth in the derivative markets for commercial and institutional clients rather than individuals. And because of its global clientele, when it moved into the retail brokerage business, it did so with a big splash. It was one of the few brokerages where you could buy stocks off foreign exchanges without having to deal with all the hurdles traditional retail brokerages set up to discourage individual investors from getting in on this strategy.
If you can buy a Japanese stock in Japan, you not only play the stock, but also the currency. Also, may foreign companies that trade in the US are not the same as the stocks that trade in their home markets.
What’s more, IBKR is now trading bitcoin futures. Up 63% in 2017, it’s full steam ahead for 2018.
Progressive Corp (NYSE:PGR) is a P&C insurer that is primarily focused on the automotive and commercial vehicle markets. It does have some exposure in housing and rental insurance markets, but its fundamental business since its inception in 1937, is cars, trucks, boats, RVs, etc.
It was the first insurer to allow customers to pay in installments and it was one of the first to have drive-in claims service. PGR has continued to innovate for its customers with recent innovations like pricing comparisons with competitors and a “name your price” tool, where you set the price and PGR will tell you the coverage.
These tools aren’t gimmicks but built into the fabric of the company. By 1992 it was the largest seller of auto insurance through independent insurance agents.
PGR is well positioned for an expanding economy and a confident consumer.
Farmers & Merchants Bancorp Inc (NASDAQ:FMAO) is a regional bank serving Northwest Ohio and Northeast Indiana. It has a $388 million market cap and hands out a 1.4% dividend yield.
And FMAO stock is up 133% in 2017.
Yep, a small bank in the Rust Belt more than doubled its stock price this year.
Granted, the past few years haven’t seen much out of this stock. But as the economy recovers and US manufacturing starts to emerge from its long recession, so has FMAO.
The best news is, regional banks like FMAO are best positioned to thrive as the economy recovers since they tend to have better quality loan portfolios (they know the businesses they lend to) and don’t have as much regulatory red tape as national banks.
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.