Financial institutions play a critical role, offering everything from consumer banking to wealth management and specialized financial solutions. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have certainly contributed to the industry’s recent underperformance — over the past six months, its 1.4% gain has fallen behind the S&P 500’s 6.2% rise.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here are two financials stocks boasting durable advantages and one we’re steering clear of.
One Financials Stock to Sell:
Credit Acceptance (CACC)
Market Cap: $6.00 billion
Founded in 1972 by Donald Foss to serve customers overlooked by traditional lenders, Credit Acceptance (NASDAQ:CACC) provides auto financing solutions that enable car dealers to sell vehicles to consumers with limited or impaired credit histories.
Why Should You Sell CACC?
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Sales trends were unexciting over the last five years as its 2.7% annual growth was below the typical financials company
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Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable
Credit Acceptance is trading at $572.57 per share, or 11.6x forward P/E. Check out our free in-depth research report to learn more about why CACC doesn’t pass our bar.
Two Financials Stocks to Buy:
Hamilton Lane (HLNE)
Market Cap: $3.60 billion
With over $100 billion in assets under management and supervision, Hamilton Lane (NASDAQ:HLNE) is an investment management firm that specializes in private markets, offering advisory services and fund solutions to institutional and private wealth investors.
Why Will HLNE Beat the Market?
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Annual revenue growth of 17.3% over the last five years was superb and indicates its market share increased during this cycle
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Incremental sales over the last two years have been highly profitable as its earnings per share increased by 22.6% annually, topping its revenue gains
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Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $82.41 per share, Hamilton Lane trades at 13.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Ameriprise Financial (AMP)
Market Cap: $46.75 billion
Founded in 1894 and spun off from American Express in 2005, Ameriprise Financial (NYSE:AMP) provides financial planning, wealth management, asset management, and insurance products to help individuals and institutions achieve their financial goals.