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The best performing stocks in the market are usually the highest growing stocks, or those with the highest expected growth rates. This doesn’t mean that one should be invested in growth stocks and stay away from the value stocks at all times. Historically, value stocks managed to beat growth stocks hand over fist. The reason is simple. Value stocks are beaten down stocks with very low or negative growth expectations. Not surprisingly, it is easier for these stocks to beat the expectations on the average. On the other hand, everybody is extremely bullish about growth stocks and expect them to have higher growth rates in the future. Their stock prices also reflect this fact. Not surprisingly, it is more difficult for these stocks to beat these challenging expectations.

We ranked the financial stocks based on their expected 5-year growth rates. The data source for Wall Street Analysts’ projections is Thomson Financial. Contrarian investors should look into the stocks at the top of the table. These are more likely to exceed the expectations and outperform their peers. Here are the 20 stocks with the lowest expected annual growth rates over the next 5 years:

Company Name

Symbol

Exp. Growth Rate

Dividend Yield

Forward PE

SUNTRUST BANKS INC.

STI

3.2

0.1

12.6

KEYCORP

KEY

3.9

0.5

11.7

HUNTINGTON BANCSHARES

HBAN

4.5

0.6

9.8

BB&T CORP

BBT

5.0

2.4

10.4

U.S. BANCORP

USB

5.1

1.9

10.4

COMERICA INC

CMA

5.4

1.1

14.9

PEOPLE'S UNITED FNCL

PBCT

5.4

5.0

15.7

DISCOVER FINANCIAL

DFS

5.5

0.4

10.0

PNC FINANCIAL SERVICES

PNC

5.5

0.6

9.9

BANK OF AMERICA CORP

BAC

5.6

0.3

7.6

JPMORGAN CHASE & CO

JPM

6.2

2.2

8.1

PROGRESSIVE CORP

PGR

7.2

1.9

12.4

WELLS FARGO & CO

WFC

7.4

0.6

9.1

CHIMERA INVESTMENT

CIM

7.7

15.9

6.1

CAPITAL ONE FINANCIAL

COF

7.7

0.4

9.3

ALLSTATE CORP

ALL

8.0

2.7

8.4

MANULIFE FINANCIAL CORP

MFC

8.0

3.0

9.5

BANK OF NEW YORK MELLON

BK

8.1

1.2

9.7

CREDIT SUISSE GROUP

CS

8.2

4.2

7.3

ROYAL BANK OF CANADA

RY

8.4

3.3

11.1

Prominent hedge funds are bullish about the financials industry. David Tepper had a $124 Million position in Suntrust Banks (NYSE:STI) at the end of December. John Paulson is also bullish about STI. Huntington Bancshares (NASDAQ:HBAN) has seen significant insider purchases at the end of last year. Lee Ainslie’s Maverick Capital also had a $90 Million position in the bank. Warren Buffett and Andreas Halvorsen are two prominent investors with USB investments.

Among the major banks, JP Morgan (NYSE:JPM) attracts the most attention. Hedge funds, 164 of them, own 4% of JPM’s outstanding shares. During the fourth quarter, they spent $1.8 Billion to place their bullish bets. Steven Mandel, John Griffin, Bill Miller, and George Soros are among the high profile hedge fund managers invested in JPM.

We believe investors can outperform the financial sector in the long term by buying these 20 stocks. If they are still skeptical about financial stocks and don't want to expose themselves to this sector, then they can either short sell the sector ETF (NYSEARCA:XLF) or a portfolio of other financial stocks with high expected growth rates to hedge their risk.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Financial Stocks With the Highest Upside Potential