In this article, we discuss the 10 finance stocks to buy during interest rate hikes. If you want to read about some more finance stocks to buy as interest rates rise, go directly to 5 Finance Stocks to Buy During Interest Rate Hikes.
Hedge fund billionaires and analysts on Wall Street have over the past few weeks issued multiple warnings about an impending doom for the stock market. On March 23, Carl Icahn, the billionaire chief of Icahn Capital LP, told news platform CNBC that there “very well could be a recession or even worse” as consumers battle inflation and the market deals with the fallout of the Western sanctions on Russia in the wake of the Ukraine war. On March 11, Goldman Sachs had downgraded the growth outlook for the US economy in 2022 by 25 basis points to 1.75%.
In February, the inflation rate in the US had reached close to 8%, a high last seen almost four decades ago. Compared to the economic crisis of 2007 and 2008, where the inflation rate had hovered around 2.8% to 3.8%, there are larger risks that the Federal Reserve will soon have to raise interest rates higher to tame inflation, ultimately weakening the economy. Fed chief Powell has already signaled that the central bank is prepared to do that this year. A massive bubble in tech stocks could complicate matters further.
John Weinberg, a veteran of the Federal Reserve Bank of Richmond, told news publication Fortune in March that the markets have not seen a “monetary policy-induced recession” in decades, making it difficult to predict the trajectory they might take as rates keep on rising. In this context, finance stocks may be the safest bets for investors. Some of the top finance stocks to buy during interest rate hikes include Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), among others discussed below.
Photo by Ferran Fusalba Roselló on Unsplash
Our Methodology
The companies that operate in the finance sector and have been on the radar of market experts as interest rates rise were selected for the list. Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Finance Stocks to Buy During Interest Rate Hikes
10. The PNC Financial Services Group, Inc. (NYSE:PNC)
Number of Hedge Fund Holders: 40
The PNC Financial Services Group, Inc. (NYSE:PNC) is a diversified financial services firm. Elite hedge funds hold bullish positions in the stock. At the end of the fourth quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $663 million in The PNC Financial Services Group, Inc. (NYSE:PNC), compared to 41 in the previous quarter worth $506 million.
On February 3, JPMorgan analyst Vivek Juneja kept an Overweight rating on The PNC Financial Services Group, Inc. (NYSE:PNC) stock and raised the price target to $232.50 from $229.50, noting that higher interest rates will be the main driver of the earnings for the bank followed by better loan growth in the near-term.
Just like Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), The PNC Financial Services Group, Inc. (NYSE:PNC) is one of the stocks that investors are buying as inflation rises.
9. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 49
BlackRock, Inc. (NYSE:BLK) operates as an investment manager. On February 18, Deutsche Bank analyst Brian Bedell maintained a Buy rating on the stock with a price target of $1,024, underlining that the outlook for “rate-sensitive” stocks like BlackRock remained bright based on the Fed’s forecast on rate increases through 2022.
Hedge funds have been loading up on BlackRock, Inc. (NYSE:BLK) stock. At the end of the fourth quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in BlackRock, Inc. (NYSE:BLK), compared to 44 the preceding quarter worth $1 billion.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and BlackRock, Inc. (NYSE:BLK) was one of them. Here is what the fund said:
“During the quarter, we initiated a position in BlackRock, Inc. (NYSE:BLK), the world’s largest investment manager with $9 trillion in assets under management. BlackRock offers an array of products across equities, fixed income, alternatives, and cash management to institutional and retail investors worldwide. About one-quarter of BlackRock’s assets under management is actively managed, and the rest is in passive index funds and iShares-branded ETFs. The company offers technology services including the investment and risk management platform, Aladdin, as well as other advisory services and solutions. Over the five years ending December 31, 2020, assets under management and earnings per share grew at compound annual growth rates of 13% and 12%, respectively.
We believe BlackRock, Inc. (NYSE:BLK) is well positioned for continued growth given its diverse product offering, global distribution, brand recognition, and capable management team. With most of its assets in index funds and ETFs, BlackRock is a prime beneficiary of the ongoing shift to passive investing. The company also benefits from increasing demand for sustainable investment strategies and “barbell” strategies that use a combination of low-cost index funds, active and illiquid alternatives products. BlackRock, Inc. (NYSE:BLK) fits squarely within our Tech-Enabled Financials theme given its longstanding commitment to innovation and proprietary technology platform, Aladdin, which serves as the investment and risk management system for both BlackRock and a growing number of institutional investors around the world. We expect BlackRock’s earnings per share will continue to grow at a double digit annual rate over a market cycle through a combination of mid-single-digit growth in assets under management from net inflows, market appreciation, low to mid-teens revenue growth in technology services, modest margin expansion, and share repurchases.”
8. SVB Financial Group (NASDAQ:SIVB)
Number of Hedge Fund Holders: 47
SVB Financial Group (NASDAQ:SIVB) is a diversified financial services firm. Major hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in SVB Financial Group (NASDAQ:SIVB) with 595,771 shares worth more than $404 million.
On March 21, Wells Fargo analyst Jared Shaw kept an Overweight rating on SVB Financial Group (NASDAQ:SIVB) stock with a price target of $810, backing the firm to deliver “industry-leading” growth in the coming months as the market settles down.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and SVB Financial Group (NASDAQ:SIVB) was one of them. Here is what the fund said:
“Among our top contributors was SVB Financial Group (NASDAQ:SIVB). SVB Financial Group is a leading provider of banking services to the innovation economy across the US and in key international markets. Headquartered in Silicon Valley, SVB Financial Group (NASDAQ:SIVB) offers financial products to clients in the technology, life science/health care and private equity/venture capital. Total client funds increased 51% to $243 billion in 2020—one of the company’s strongest years—as investors seek differentiated returns in innovative private companies. SVB’s high level of client service and long experience in the industry give it not only a historical data and knowledge advantage, but also a reputational edge. We believe this enables SVB Financial Group (NASDAQ:SIVB) to quickly bring products to market and make speedy underwriting decisions. Given SVB’s strong profit growth comes at a time when net interest margins are depressed, we believe shares are priced attractively and added to our position.”
7. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 64
American Express Company (NYSE:AXP) provides payment and travel products. On March 17, Bank of America analyst Mihir Bhatia maintained a Buy rating on the stock and raised the price target to $206 from $204, noting there was upside potential in the stock as earnings visibility and investor sentiment improved.
American Express Company (NYSE:AXP) is one of the favorite payment stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company (NYSE:AXP) with 15.7 million shares worth more than $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company (NYSE:AXP) was one of them. Here is what the fund said:
“In financials, American Express Company (NYSE:AXP) has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
6. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 65
Morgan Stanley (NYSE:MS) provides financial products and services. At the end of the fourth quarter of 2021, 65 hedge funds in the database of Insider Monkey held stakes worth $4.5 billion in Morgan Stanley (NYSE:MS), the same as in the preceding quarter worth $4.9 billion.
On January 3, Barclays analyst Jason Goldberg kept an Overweight rating on Morgan Stanley (NYSE:MS) stock and raised the price target to $123 from $110, underlining that bank stocks were expected to outperform the wider market in 2022 as loan growth accelerated and net interest margins improved.
Alongside Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), Morgan Stanley (NYSE:MS) is one of the stocks on the radar of hedge funds as interest rates rise.
In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Morgan Stanley (NYSE:MS) was one of them. Here is what the fund said:
“Top three contributor Morgan Stanley (NYSE:MS), a leading global financial services company, came into the portfolio in Q4 as a result of its purchase of E*TRADE. E*TRADE is a great fit on Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked Morgan Stanley’s business by adding less volatile fee streams and deemphasizing the risk-obtuse culture of prior management. We believe the market will come to appreciate this mix shift over time.”
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Disclosure. None. 10 Finance Stocks to Buy During Interest Rate Hikes is originally published on Insider Monkey.