Growth Investors: Pick These Finance Stocks Over Wells Fargo

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Shares of Wells Fargo & Company WFC have lost more than 10% year to date amid industry-wide weakness and global concerns. While the San Francisco, CA-based banking giant exhibits strength in several areas – including growing deposits and loan balances, maintenance of a strong capital position and remaining focused on undertaking strategic acquisitions – profitability remains challenged by a number of issues.

The bank’s revenues continue to be under pressure amid a stricter regulatory landscape and a persistent low interest rate scenario. The December rate hike was not enough to result in a significant boost. During the first six months of 2016, increased net interest income and non-interest income boosted revenues, but net interest margin contracted 8 basis points on a year-over-year basis to 2.88%. Further, Wells Fargo lowered its Return on equity (ROE) and Return on assets (ROA) targets at its annual Investor Day held in May this year.

Though the Fed’s July policy meeting minutes released on Wednesday hinted at the resumption of rate hike, no specific timeline was mentioned. While certain positive domestic economic factors – including a recovery in job market and increased consumer spending – are likely to increase the odds of a rate hike, we don’t expect any action from the Fed any time soon. Particularly, the Brexit-induced uncertainties and the upcoming Presidential election might cause further delay.

With Wells Fargo currently carrying a Zacks Rank # 5 (Strong Sell) and a Growth Score of ‘F,’ we don’t see it as an attractive investment option.

Investing Right

Investing in large cap stocks is often perceived as a safe strategy to stay afloat amid market mayhem. However, it may not lead to desirable results at times.

Investors putting their money in a large cap stocks simply because the company is anticipated to continue its growth momentum over the next several years may end up as victims of the growth trap. This problem can be overcome by investing in companies which are expected to grow, but at a faster pace than what is predicted by the market.

Finance Stocks to Bet On

With the help of the Zacks Stock Screener, we have zeroed in on four finance stocks with a market capitalization over $1 billion. All these stocks have witnessed at least 7% positive price movement year to date and sport highly desirable Zacks Rank #1 (Strong Buy) or 2 (Buy).

Further, these have a Growth Style Score of ‘A’ or ‘B,’ ensuring solid growth prospects.

Here are the four stocks that met the criteria:

Euronet Worldwide, Inc. EEFT: Headquartered in Leawood, KS, the company is a leading player in processing secure electronic financial transactions. Euronet is engaged in providing payment and transaction processing solutions globally to a wide client base including financial institutions, retailers, and individual consumers.

Zacks Rank #2
Growth Score: ‘B’
Expected EPS Growth (3–5 years): 14.8%
Price Change: +7.3%

Eaton Vance Corp. EV: Based in Boston, MA, the company is a leading global asset manager. With offices in North America, Europe, Asia and Australia, it offers a wide range of investment strategies and wealth management solutions to individuals and institutions.

Zacks Rank #2
Growth Score: ‘A’
Expected EPS Growth (3–5 years): 9.1%
Price Change: +23.2%

First American Financial Corp. FAF: The Santa Ana, CA-based company is a provider of title insurance, settlement services and risk solutions for real estate transactions. The company also provides title plant management services, title and other real property records and images and banking, trust and investment advisory services.

Zacks Rank #2
Growth Score: ‘B’
Expected EPS Growth (3–5 years): 9.3%
Price Change: +18.9%

Federated Investors, Inc. FII: Headquartered in Pittsburgh, PA, Federated Investors Inc. (FII) is a publicly-owned investment management company offering services to a broad client base including high net worth individuals, banking or thrift institutions, investment companies, state or municipal government entities, and registered investment advisors. The majority of Federated’s revenues are derived from advising and administering Federated-sponsored funds and Separate Accounts in both domestic and international markets.

Zacks Rank #2
Growth Score: ‘B’
Expected EPS Growth (3–5 years): 8.6%
Price Change: +13.4%

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WELLS FARGO-NEW (WFC): Free Stock Analysis Report
 
FEDERATED INVST (FII): Free Stock Analysis Report
 
EATON VANCE (EV): Free Stock Analysis Report
 
EURONET WORLDWD (EEFT): Free Stock Analysis Report
 
FIRST AMER FINL (FAF): Free Stock Analysis Report
 
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