Financial stocks have slumped; here are 10 with potential

The S&P 500 Financials stock index posted a negative return of 3.11% year to date through Friday.

Oct 17, 2023 - 19:30

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Financial stocks have slumped; here are 10 with potential

The S&P 500 Financials stock index produced a negative 3.11% return so far this year through Friday, compared with a 13% gain for the S&P 500 as a whole.

But 17 financial services stocks made Morningstar’s list of the best stocks to own for 2023. The companies on that list all have wide Morningstar moat ratings. That means the firm sees them having competitive advantages that will last at least 20 years.

Morningstar also says the companies have strong management teams, balance sheets and investments.

Here are 10 of the companies on the financial services roster, listed alphabetically.

Credit Cards, Investments, Financial Exchange

1. American Express (AXP) - Get Free Report, the upscale credit card company

Morningstar fair value estimate: $178. Monday price quote: $153.05.

“The company’s greatest strength remains its cardholder base of high-spending individuals and small businesses,” wrote Morningstar analyst Michael Miller.

“The high average spending rate on American Express cards makes its cardholders attractive to merchants, and the company has been able to form valuable partnerships in exchange for access to these cardholders.” Miller sees this trend continuing.

2. Berkshire Hathaway (BRK.B) - Get Free Report, Warren Buffett’s investment group

Morningstar fair value estimate: $400. Monday price quote: $347.15.

“Berkshire, owing to its diversification and its lower overall risk profile, offers one of the better risk-adjusted return profiles in the financial-services sector,” wrote Morningstar analyst Greggory Warren. “And it remains a generally solid candidate for downside protection during market selloffs.”

In addition, “it will take some time before the firm finally succumbs to the impediments created by the sheer size and scale of its operations,” he said.

Warren Buffett's Berkshire Hathaway investment group is on Morningstar's list of best financial-services stocks.
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3. CME (CME) - Get Free Report, the financial-exchange operator

Morningstar fair value estimate: $215. Monday price quote: $219.25.

“CME has a dominant position in many of the contracts that trade in its exchange and is well diversified across multiple product lines,” Miller wrote.

“In the long term, we anticipate that the company will continue to benefit from secular growth in the need to hedge commodity, energy, and interest rate exposure. CME also has a history of generating incremental growth through the introduction of new futures contracts.”

4. JPMorgan Chase (JPM) - Get Free Report, the financial-services group

Morningstar fair value estimate: $153. Monday price quote: $147.55.

5. Northern Trust (NTRS) - Get Free Report, a trust bank

Morningstar fair value estimate: $86. Monday price quote: $68.70.