Best Financial Stocks to Buy

Wells Fargo

• Market value: $184.2 billion
• Dividend yield: 2.7%
• Analysts' consensus recommendation: 2.04 (Buy)

Wells Fargo (WFC, $51.19) is one of the country's Big Four banks, along with JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C). It also has a broad network of retail branches. The bank is one of the largest issuers of credit and debit cards, as well, and is a leader in commercial banking and consumer financial products, according to Morningstar.

The bank also is slowly emerging from its 2016 fake accounts scandal and regulatory punishments in which the Fed imposed a cap on its asset size. "We're already starting to see glimpses of the transition to offense from defense," Morningstar analyst Eric Compton wrote.

These include the launch of several new card products, the advisor count not declining for the first time in years and $2.2 billion of incremental internal investments in 2023. However, a full turnaround could take years.

Despite headwinds, Wells Fargo has the third most deposits in the U.S. after JPMorgan and Bank of America.

Compton believes Wells Fargo still has a wide competitive moat due to cost advantages and the reluctance of most depositors to switch banks. The financial firm has lower costs due to its large scale and breadth of products.

Wells Fargo is large enough to be considered a global systemically important bank, too. The top financial stock also has a wide moat, according to Morningstar, which means it has competitive advantages that are expected to last more than 20 years into the future.

Tradeweb Markets

• Market value: $20.8 billion
• Dividend yield: 0.4%
• Analysts' consensus recommendation: 2.00 (Buy)

Tradeweb Markets (TW, $98.37) was formed in 1996 as an online exchange serving the opaque U.S. Treasuries market. Today, it operates electronic trading platforms for fixed-income products, derivatives and ETFs.

TW remains a leader in electronic trading of fixed-income securities, according to Morningstar. Since most fixed-income trading is still done by phone or chat, Tradeweb's electronic marketplace ensures it has a long runway of growth ahead of it, Morningstar analyst Michael Miller wrote.

He expects Tradeweb to see low double-digit revenue growth for years to come.

However, competition is bound to come as electronic networks become more attractive to traders. "As Tradeweb rolls out new features like automated trade execution and portfolio trading, the cost advantages of electronic trading networks over traditional methods continues to increase," he said. But this transition is still in its early days.

In the current environment of market volatility, TW as a trading platform benefits in the form of increased trading volumes, according to a research note from Deutsche Bank.

In its latest quarterly earnings report, this top financial stock said average daily trading volume hit a record of $1.4 trillion, up 30% from the year prior. This impressive milestone was notched amid strength in U.S. and Chinese bonds.

In 2023, Tradeweb launched a new market data service to calculate iNAVs (intraday net asset value) meant to represent a single share of an ETF. BlackRock is the first client for the service. Also, the company acquired Yieldbroker, a government bond and derivatives platform for Australia and New Zealand, for AUD 125 million ($83 million). These initiatives will help boost TW's bottom line.

JPMorgan Chase

• Market value: $507.1 billion
• Dividend yield: 2.4%
• Analysts' consensus recommendation: 1.88 (Buy)

 JPMorgan Chase (JPM, $176.27) is typically found on lists of the best financial stocks to own, and for good reason. It is the largest bank in the U.S. and among the largest in the world, based on assets. It also found itself becoming arguably the most influential financial institution in America following the spring 2023 regional banking crisis.

In early May 2023, JPMorgan acquired the majority of First Republic Bank's operations at the behest of the Federal Deposit Insurance Corp. (FDIC). The regional bank was collapsing following a bank run that was sparked by the implosion of Silicon Valley Bank and Signature Bank. 

"Our government invited us and others to step up, and we did," said JPMorgan Chairman and CEO Jamie Dimon, in a statement.

First Republic is the third failed bank JPMorgan has taken over, following Bear Stearns and Washington Mutual during the financial crisis of 2008. JPM stepping in has helped to defuse bank depositor panics.

These takeovers helped to propel JPMorgan's assets under management to $3.4 trillion at the end of 2023. But above it all is Dimon, who is himself an influential figure in finance.

The bank's namesake, John Pierpoint Morgan Sr., famously locked his Wall Street peers in his study until they agreed to join him in bailing out a panic-stricken financial system in 1907, according to The New York Times. "Not since then has the leader of a single company held such sway over the U.S. financial system," the paper said.

JPMorgan's 10-year total return of 13.4% on average per year has outpaced the industry, which clocks in at 6.1%. Over a 15-year horizon, JPMorgan returned 15.1% on average per year vs 9.3% for the industry.

Intuit

• Market value: $181.3 billion
• Dividend yield: 0.6%
• Analysts' consensus recommendation: 1.77 (Buy)

Intuit (INTU, $647.72) is the financial giant behind TurboTax, the do-it-yourself tax filing service and software, as well as QuickBooks, the popular bookkeeping software for small businesses and sole proprietors. It also owns popular email marketing firm, Mailchimp, and credit-scoring firm Credit Karma.

The company has been expanding its total addressable market by offering to do taxes for consumers and small businesses. In 2023's Super Bowl, it debuted a commercial that tells people they can "Come to TurboTax and don't do your taxes." Instead, taxpayers will be matched with a tax expert who will prepare and file their taxes in just one meeting.

Intuit is doing the same with QuickBooks by evolving it into a portfolio of expert services available to small businesses. In 2023, it launched a free service in which experts guide QuickBook through its new suite of offerings.

With Credit Karma, INTU is adding new services such as users getting tax refunds as quickly as one minute after the IRS accepts their tax returns. This and other new services are aimed at making Credit Karma into a "comprehensive, self-driving financial platform," said Intuit CEO Sasan Goodarzi, on a recent earnings call.

Intuit continues to expect double-digit annual revenue growth for fiscal 2024.

And INTU is one of the best financial stocks according to Wall Street, as evidenced by a consensus Buy rating. Oppenheimer is among those that has an Outperform (Buy) rating on Intuit, saying the company's TurboTax will help boost the bottom line.

What's more, Intuit is a member of the outperforming Morningstar Wide Moat Focus Index.

Equifax

• Market value: $30.6 billion
• Dividend yield: 0.6%
• Analysts' consensus recommendation: 1.74 (Buy)

Equifax (EFX, $248.21) is one of the three big U.S. credit bureaus, along with TransUnion and Experian. But its business spans beyond determining a good credit score.

The company has beefed up its core business with a string of complementary acquisitions, notably Kount, an AI-powered fraud prevention and digital identity solutions company it bought for $640 million in 2021. A year later, it added Midigator, a provider of post-transaction fraud mitigation solutions, to its stable of offerings.

EFX is one of the best financial stocks in terms of price performance, with a quarterly total return (price + dividends) over 15 years that has outpaced the industry: 16.6% annually compared to 12.7%. It also outperformed the broadly diversified Morningstar U.S. Market TR Index, which returned 13.9% a year over the same period.

Notably, "Equifax's star in recent years has been its workforce solutions segment, which is now its largest segment," Morningstar analyst Rajiv Bhatia said in a research note.

Workforce solutions encompass human resources compliance management such as employee onboarding, payroll, tax management, compliance and the like.

The $1.8 billion acquisition of Appriss Insights in 2021 expanded the capabilities of workforce solutions, he said. Appriss provides risk and criminal justice intelligence products and solutions. This information is used for public and workplace safety, law enforcement purposes, corporate investigations, fraud detection and prevention and healthcare sanctioning and credentialing.

Workforce solutions also include income verification, mainly for mortgages, which the analyst said Equifax does not have "meaningful direct competition." He expects EFX to stay in the lead "as the large amount of existing records and the difficulty of convincing employers to share employee information would be too tough for new entrants to overcome."

The analyst expects Equifax to expand its income verification services to auto, card, government services, and employment screening. 

Intercontinental Exchange

• Market value: $73.9 billion
• Dividend yield: 1.3%
• Analysts' consensus recommendation: 1.72 (Buy)

Intercontinental Exchange (ICE, $129.02) is the parent of the venerable New York Stock Exchange (NYSE), the New York Board of Trade and the Chicago Stock Exchange, among other institutions. It operates a total of 10 exchanges and six clearing houses around the world.

But the company has been diversifying its revenue sources through acquisitions of businesses in mortgage technology and fixed income and data services, as competition among exchanges remains stiff.

In mortgage technology, ICE provides a platform of comprehensive tools for mortgage application up through closing and the secondary market. The fixed income and data services unit offers fixed income pricing, reference data, indices, analytics and execution services plus global credit default swap clearing and multi-asset class data delivery solutions.

In September 2023, ICE closed its acquisition of Black Knight's loan origination business for $11.9 billion in cash and stock. This acquisition will boost ICE's position as a provider of end-to-end home mortgage services. 

The current market volatility and rising interest rates have boosted exchange revenue as trading volume increased in certain products. However, they have also held down the mortgage business as demand softened.

And with both interest and mortgage rates "coming down at the end of last year, investors have become incrementally more bullish on mortgage-related stocks, including ICE," says UBS Global Research analyst Alex Kramm. "The stock continues to set up well for a cyclical recovery, while structural opportunities and new customer wins should be supportive at the same time."

Intercontinental Exchange is a member of the Morningstar Wide Moat Focus Index, which has outperformed U.S. stocks over time. ICE has also been one of the best financial stocks in terms of price performance, boasting an average annual total return of 18.6% over the past 15 years vs an 14.9% return for the S&P 500. 

BlackRock

• Market value: $116.1 billion
• Dividend yield: 2.6%
• Analysts' consensus recommendation: 1.65 (Buy)

BlackRock (BLK, $781.73) is the world's largest asset manager with $10 trillion in assets under management (AUM). About 80% of its AUM comes from institutional clients, which tend to be more stable than individual investors, according to Morningstar.

As investors flock to passive investments such as index funds and exchange-traded funds (ETFs), BlackRock is well-positioned because passive strategies make up two-thirds of its AUM. Its iShares exchange-traded fund offerings account for a third of all its managed assets. They are also some of the best ETFs out there and are the market share leader in the U.S. and globally.

The asset management company is diversified as well: Half of its AUM consists of equity assets, 29% is in fixed income, with money market funds, multi-asset classes and alternatives comprising the rest. BlackRock has clients in more than 100 countries – 62% in the Americas, 29% in Europe, the Middle East and Africa (EMEA), and 9% in the Asia-Pacific region.

According to Morningstar, BlackRock will benefit from an expanding ETF market, improved active fund operations, further adoption of ESG analytics and investing, increased multi-asset and alternatives exposure and continued efforts to use the latest technology.

BLK is looking to expand in the Asia-Pacific region as well. It already has an asset management joint venture in China with Temasek and China Construction Bank, the world's second largest bank, aimed at the Chinese market. Notably, BlackRock has gotten Chinese regulatory permission to be one of the first global asset managers to run a wholly owned mutual fund business in China.

"We believe that BLK should trade at a premium to large-cap financial stocks given the company's above-average operating margins, stable long-term asset inflows and history of product innovation," says Argus Research analyst Stephen Biggar (Buy). And this is why BLK will likely remain on lists of the best financial stocks for years to come.

Mastercard

• Market value: $417.7 billion
• Dividend yield: 0.6%
• Analysts' consensus recommendation: 1.50 (Strong Buy)

Mastercard (MA, $445.19) needs no introduction for anyone with a credit card. It is the second most accepted card in the world, after Visa (V). The card company benefits from a network effect in which the more consumers join the payment network, the more attractive the network becomes to merchants.

Mastercard's business has stayed resilient in the face of a softening economy. In Q4 2023, net revenue rose by a higher-than-expected 11% from the prior year. 

Oppenheimer analyst Dominick Gabriele recently upgraded MA to Outperform from Neutral, the equivalents of Buy and Hold, respectively. 

"Even with depressed consumer spending levels, MA could produce greater than 11% earnings per share growth as expense cuts offset declining revenue growth and buybacks increase," Gabriele wrote in a note to clients. "Since its 2023 October low, MA has performed roughly in line with the S&P500 and we recommend buying quality to start 2024 vs chasing high-flying fintech stocks at current valuations." 

The analyst is hardly alone in thinking MA is one of the best financial stocks around. As proof, it is the only name on this list with a consensus Strong Buy rating, according to S&P Global Market Intelligence.