Since the beginning of 2022, the stock market has witnessed high volatility induced by several concerns, including the outbreak of the Omicron variant, supply-chain issues, inflationary pressures, and now the Ukraine-Russia war. Amid such uncertain times, financial stocks can see a ray of hope in the form of rising interest rates.
The Federal Reserve raised rates by 25 basis points in March 2022 for the first time since December 2018. Also, it set a hawkish tone in the last meeting, indicating six more increases during the year.
Financial companies have been seen to flourish during rising interest rate environments, as higher rates help improve their interest income and lift profit margins. However, which stocks in the financial sector should you choose?
Our tools can help you answer this question. The TipRanks Smart Portfolio allows investors to benchmark their portfolios against the best performing portfolios on TipRanks and the average TipRanks portfolio.
The tool showcases three growth stocks from the financial sector with a positive P/E ratio, which reflects investors’ expectations of positive future performance. Let’s take a closer look at them.
Realty Income (NYSE: O)
Based in San Diego, CA, Realty Income is a real estate company which engages in investing in free-standing, single-tenant commercial properties. The stock currently has a P/E ratio of 83.8.
“The Monthly Dividend Company,” as Realty Income is commonly referred to as, provided guidance for 2022 AFFO of $3.84 to $3.97, representing 8.8% annual growth based on the midpoint. Same-store rent is expected to grow at 1.5%. It is expected to report earnings of $0.42 per share for the first quarter of 2022 on May 4, 2022.
Last month, Wolfe Research analyst Andrew Rosivach, CFA upgraded Realty Income’s rating to Buy from Hold with a price target of $84 (15.7% upside potential from current levels).
Other analysts, however, are cautiously optimistic, with a Moderate Buy consensus rating based on seven Buys and three Holds. The average Realty Income price forecast of $75.89 implies approximately 4.5% upside potential from current levels.
Contrary to investors on the Street, retail investors on TipRanks are Very Positive about the stock. Out of 116,752 best-performing portfolios, 2.5% of portfolios hold Realty Income stock. In the past month, 15.5% of these portfolios have raised their holdings of the stock.
Bank of America (NYSE: BAC)
Headquartered in Charlotte, NC, Bank of America is a multinational investment bank and financial services holding company. It’s P/E ratio stands at 10.5, currently.
The company is scheduled to report Q1 earnings on April 17, 2022. The Street expects BofA to report earnings of $0.75 per share. Given BAC’s positive earnings-beat streak in the past several quarters, it is likely to surpass estimates in this quarter as well.
Recently, Ken Usdin of Jefferies reiterated a Hold rating on the stock while lowering the price target to $43 (14.5% upside potential) from $50.
Based on 10 Buys and five Holds, Bank of America has a Moderate Buy consensus rating. BAC’s average price target of $49.96 implies 33% upside potential from current levels.
The Crowd Wisdom tool on TipRanks indicates that investors are Very Positive about the stock. Out of the 116,752 best-performing portfolios on TipRanks, 2.7% of all portfolios hold BAC. In the past month, 2.4% of these portfolios have increased their holdings of the stock.
Visa (NYSE: V)
Based in San Francisco, CA, Visa engages in the provision of digital payment services. It currently has a P/E ratio of 35.3.
The company’s EPS for Q2 2022 is estimated to reach $1.65. Earnings are scheduled to be released on April 25, 2022. Visa has an impressive earnings beat history as it surpassed estimates in almost all the quarters of 2020 and 2021.
Recently, Donald Fandetti of Wells Fargo maintained a Buy rating on Visa, with a price target of $280 (31.6% upside potential).
Overall, the company has a Strong Buy consensus rating based on 16 Buys and two Holds. The average Visa price forecast of $277.13 suggests 30.2% upside potential from current levels.
Hedge funds seem to be Very Positive about Visa, as indicated by the Hedge Fund Trading activity tool on TipRanks. The cumulative change in holdings across all 73 hedge funds that were active in the last quarter was an increase of 12.5 million shares.
It is always prudent to understand all dynamics before investing in a stock. However, the above stocks can be looked upon as favorable bets considering improving aspects for financial companies in the near-term, bullish analyst opinions, and their presence in the Best Performing Portfolio on TipRanks.
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