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Financial Stocks Could Offer Value in 2022

These banking options are trading below value

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May 25, 2022
Summary
  • Banks are set to benefit from rising interest rates.
  • If price targets are met, investors will profit.
  • Check funds for exposure before buying shares.
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Financial stocks may prove to be a port in the stock market storms of 2022. For value investors, equities in financial companies are well-priced, have low betas and are likely to rise in share price.

While the sector is down year to date, it is still outperforming the S&P 500.

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Along with the energy sector, financials stand to benefit from the unique conditions of 2022, such as the rise in interest rates. These five banking options could add profits to your value investment portfolio. Be aware that if you own mutual fund or exchange-traded fund shares, you may already have exposure to some of these bank stocks.

Citigroup

Citigroup Inc. (

C, Financial) is trading low right now, down 19% and at less than tangible book value, giving value investors a chance to buy shares at bargain prices.

Rated as a buy or hold right now by analysts, the company is going through a strategic restructuring, so it could emerge stronger later this year. Citigroup has an attractive dividend yield of 3.87%.

Bank of America

Bank of America Corp. (

BAC, Financial) is ranked a buy since analysts think it stands to continue to be a strong national banking franchise and will profit from rising interest rates.

The company reported a 52% decline in charge-offs earlier this year. Its dividend yield is 2.27%, which is high enough to attract some passive income interest. Its price target is $60 and on May 25 was trading at $35.80, leaving plenty of room for profits if Bank of America hits this target.

JPMorgan Chase

Like many other companies, JPMorgan Chase & Co. (

JPM, Financial) faces supply chain and geopolitical issues, but the stock has a $155 price target.

Given that shares traded at $126.19 May 25, it could deliver tidy profits if price targets are hit. Additionally, its dividend yield is 3.09%. JPMorgan is rated as a buy-and-hold stock.

Wells Fargo

Shares of Wells Fargo & Co. (

WFC, Financial) saw a drop, but the company is on target to bring a 15% return on average tangible common stockholder equity in the next few quarters.

Rated a buy by most analysts, Wells Fargo showed a net reduction of expenses this year, and that is expected to be a trend. The company has more rate sensitivity than other bank options, which may give it more of a boost from rising interest rates.

Financial Select Sector SPDR ETF

An easy way for investors to have financial sector exposure is to buy shares of a financial exchange-traded fund. One option is the Financial Select Sector SPDR ETF (

XLF, Financial), which counts Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) as its largest holding. It also has positions in Bank of America, Wells Fargo, Citigroup and others.

An ETF may be a less risky way to invest in the financial sector since the risk is spread among a variety of companies.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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