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What are US Financial Stocks?

When speaking of the financial sector, most individuals think of it as banks. Even though banks form the biggest part of the financial sector, the sector also includes many other types of businesses.

The US financial sector comprises businesses that offer insurance, loan, banking, payment services and money management services. It also includes investment brokerage, asset management, and credit services companies. The financial sector offers a better balance between risk and reward than many other sectors right now. 

Some of the popular companies in the financial sector include American International Group Inc., Bank of America, Wells Fargo, JP Morgan Chase, Citi, Berkshire Hathaway Inc., Visa, Master Card and Morgan Stanley.

Best US Banks and Financial Service Stocks to Buy Now in 2024

1) Berkshire Hathaway Inc. (BRK.A)

Founded in 1835 and headquartered in Omaha, Nebraska, Berkshire Hathaway is a diversified holding company led by legendary investor Warren Buffett. They don’t directly manufacture products but invest in a variety of businesses across sectors like insurance (Geico, General Re), utilities (Berkshire Hathaway Energy), and manufacturing (Precision Castparts). Berkshire Hathaway is well known for its long-term investment approach and value investing philosophy.

  • Marketcap: 885.11B
  • EPS: 50,861.40 
  • PE Ratio: 12.15
  • Price/Book: 1.55
  • Forward Dividend Yield: N.A.
  • Profit Margin: 19.90%
  • Operating Margin: 18.39%

2) Visa Inc. (V)

Established in 1970 and headquartered in Foster City, California, Visa is a global giant in digital payments. They operate a vast electronic funds transfer network facilitating secure transactions between cardholders, merchants, and financial institutions. The Visa brand is trusted worldwide, appearing on billions of credit cards, debit cards, and digital wallets. While Visa itself doesn’t issue cards, their network infrastructure enables the smooth functioning of global digital payments.

  • Marketcap: 561.66B
  • EPS: 8.94
  • PE Ratio: 30.71
  • Price/Book: 14.11
  • Forward Dividend Yield: 2.08 (0.76%)
  • Profit Margin: 53.87%
  • Operating Margin: 66.56%

3) JPMorgan Chase & Co (JPM)

Founded in 1799 and headquartered in New York City, JPMorgan Chase is a leading financial services powerhouse. They offer a comprehensive suite of services – investment banking for corporations (advising on mergers and acquisitions), consumer banking (Chase checking and savings accounts), commercial banking for businesses of all sizes, and asset management (investing client funds). JPMorgan Chase is a major player in global finance, influencing markets and economies worldwide.

  • Marketcap: 566.46B
  • EPS: 16.57
  • PE Ratio: 11.90
  • Price/Book: 1.86
  • Forward Dividend Yield: 4.60 (2.31%)
  • Profit Margin: 33.57%
  • Operating Margin: 45.22%

4) MasterCard Inc. (M.A.)

Established in 1966 and headquartered in Purchase, New York, MasterCard is another major player in the global digital payments industry. Similar to Visa, they operate a secure electronic funds transfer network enabling transactions between consumers, merchants, and banks. MasterCard’s brand is recognized worldwide on credit cards, debit cards, and prepaid cards. They compete fiercely with Visa for market share in the ever-growing digital payments space.

  • Marketcap: 415.22B
  • EPS: 12.60
  • PE Ratio: 35.45
  • Price/Book: 57.33
  • Forward Dividend Yield: 2.64 (0.59%)
  • Profit Margin: 46.09%
  • Operating Margin: 58.76%

5) Bank of America Corp. (BAC)

Bank of America was founded in 1928 and headquartered in Charlotte, North Carolina. It is a leading financial services institution in the United States. They operate a vast network of branches offering consumer and commercial banking services, including checking and savings accounts, loans, mortgages, and wealth management. Bank of America is a major player in the U.S. financial system, serving millions of individual and business customers.

  • Marketcap: 312.50B
  • EPS: 2.90
  • PE Ratio: 13.78
  • Price/Book: 1.18
  • Forward Dividend Yield: 0.96 (2.40%)
  • Profit Margin: 26.81%
  • Operating Margin: 29.64%

6) Morgan Stanley (M.S.)

Established in 1935 and headquartered in New York City, Morgan Stanley is a leading global investment bank and financial services firm. They specialize in investment banking (helping companies raise capital), securities trading, wealth management (advising on investments), and asset management (investing client funds). Morgan Stanley caters to high-net-worth clientele and corporations, playing a key role in global financial markets.

  • Marketcap: 157.08B
  • EPS: 5.50
  • PE Ratio: 17.57
  • Price/Book: 1.74
  • Forward Dividend Yield: 3.40 (3.52%)
  • Profit Margin: 17.48%
  • Operating Margin: 34.69%

7) Wells Fargo & Co. (WFC)

Founded in 1852 and has its headquarters in San Francisco, California, Wells Fargo is a major diversified financial services company. They offer a wide range of products and services in the financial sector, including consumer banking, commercial banking, wealth management, mortgage lending, and investment banking. Wells Fargo has a strong presence across the United States, but recent controversies have impacted their reputation.

  • Marketcap: 204.57B
  • EPS: 4.80
  • PE Ratio: 12.22
  • Price/Book: 1.26
  • Forward Dividend Yield: 1.40 (2.39%)
  • Profit Margin: 24.19%
  • Operating Margin: 28.04%

8) The Charles Schwab Corporation (SCHW)

Established in 1971 and has its headquarters in San Francisco, California, Charles Schwab is a leading discount brokerage firm and financial services company. They offer online investment platforms, brokerage accounts, retirement planning services, and financial education resources. Charles Schwab focuses on empowering individual investors with tools and knowledge to manage their finances.

  • Marketcap: 135.99B
  • EPS: 2.39
  • PE Ratio: 31.13
  • Price/Book: 4.09
  • Forward Dividend Yield: 1.40 (2.39%)
  • Profit Margin: 26.14%
  • Operating Margin: 38.63%

9) Royal Bank of Canada (R.Y.)

Founded in 1869 and headquartered in Toronto, Canada, Royal Bank of Canada (RBC) is the largest bank in Canada and a leading diversified financial services company. They offer personal and commercial banking services, wealth management, insurance, and investment banking services across Canada and globally. RBC is a major player in the Canadian financial system and has a significant international presence.

  • Marketcap: 151.60B
  • EPS: 8.01
  • PE Ratio: 13.37
  • Price/Book: 1.84
  • Forward Dividend Yield: 4.14 (3.87%)
  • Profit Margin: 28.37%
  • Operating Margin: 40.04%

10) American Express Company (AXP)

Established in 1850 and headquartered in New York City, American Express (Amex) is a global financial services company best known for its travel and charge cards. They offer a variety of credit cards, charge cards, and travel services catering to a premium customer base. Amex also provides merchant payment processing services and has a growing presence in consumer lending and wealth management.

  • Marketcap: 168.81B
  • EPS: 12.13
  • PE Ratio: 19.35
  • Price/Book: 5.87
  • Forward Dividend Yield: 2.80 (1.19%)
  • Profit Margin: 15.81%
  • Operating Margin: 21.67%

Who Should Invest in US Financial Stocks?

You must be well aware of the risks before investing in the financial sector. While analysing a financial company, look at the overall company performance and economy, and not just one or two metrics. Also, financial sector investment is best in the long term.

There are a lot of things that can change the price of financial stocks in the short term, and many of them, like a weak economy or falling interest rates, have little to do with how strong the business is. Thus, pick fundamentally strong stocks and invest in the sector only if you have a long-term investment horizon.

Financial Sector Outlook in the US

The financial sector forms the core of the US economy. During the COVID-19 pandemic, the financial sector stocks have seen the worst. Banking stocks can often be cyclical in nature. To elaborate, they can lose value when the economy is bad and when unemployment goes up. During such times, businesses and individuals have trouble paying their bills. This can cause banks to have a lot of bad debt.

As interest rates go up, many companies in the financial sector have better chances to make more money. Fintech innovations like blockchain are more likely to be integrated into the industry than to change it. In the long term, the financial sector may have the potential to yield good returns.