Financial Stocks to Consider (While We’re Waiting for the Fed)

The financial markets have more or less stabilized in the wake of Brexit, but we seem to be in a holding pattern while the Fed ponders a rates shift. In a recent Forbes article, John Reese, CEO of Validea, speaks to the current economic landscape and how impending rate hikes might affect the financial sector.

There are some fundamental factors to consider when analyzing bank stock valuations. The quality of a bank’s underlying assets is key, as is its business mix. Banks with a heavier mix of commercial loans, for example (which often have floating rates) will profit more from a rate increase than those with fixed rate mortgages. Regional banks also tend to be more rate sensitive as they don’t engage in a lot of merger and acquisition activity (that can affect valuations).

Here are four financial stocks that score well under our Guru Stock Screener:

  • BBCN Bancorp Inc. (BBCN) offers commercial and retail banking loan and deposit products. Our John Neff-based model likes the company’s solid EPS growth of 13.5%, and our Peter Lynch-based strategy favors its healthy equity-to-assets ratio of 12%.
  • Bank of the Ozarks Inc. (OZRK) provides a range of retail and commercial banking services. Our Warren Buffett-based screen gives high marks to the company’s consistently strong ROE and robust EPS growth of 16.7%, while our Neff model favors its exceptional revenue growth of 22.8%.
  • Wells Fargo & Co. (WFC) offers a wide range of financial products and services and earns high marks from our James O’Shaughnessy-based investment model based on its hefty revenue base ($51.2 billion) and strong dividend yield (3.17%). WFC’s equity-to-assets ratio of 11% more than satisfies our Lynch-based screen.
  • BOFI Holding, Inc. (BOFI) is a diversified financial services company. Its P/E ratio of 9.62 passes our Martin Zweig-based investment strategy, and our Lynch model favors BOFI’s long-term EPS growth rate of 27.1%.