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The best performing stocks in the market are usually the highest growing stocks or the stocks 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 the 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 financial companies based on their expected five-year growth rates. These stocks are at least $30 Billion in market cap. The data source is Yahoo Finance. Contrarian investors should look into the stocks that are at the top of the table.

Company name

Symbol

Market cap

Forward PE

Expected 5-Year Growth Rate

Goldman Sachs

GS

50.14B

6.46

5.72

JPMorgan Chase

JPM

123.40B

5.92

8.71

Bank of Montreal

BMO

32.10B

9.77

9.05

U.S. Bancorp

USB

46.79B

9.33

9.52

MetLife, Inc.

MET

30.21B

4.96

10.12

Royal Bank of Canada

RY

66.65B

9.99

10.19

Wells Fargo

WFC

130.89B

7.4

10.72

Citigroup Inc.

C

77.97B

5.41

10.82

UnitedHealth Group

UNH

52.53B

10.23

10.88

Toronto-Dominion Bank

TD

63.42B

9.88

11.23

American Express

AXP

56.78B

11.46

11.35

The Bank of Nova Scotia

BNS

54.84B

10.27

11.80

General Electric

GE

165.05B

9.85

13.31

MasterCard

MA

42.49B

16.04

17.06

Visa Inc.

V

73.75B

15.84

17.22

Bruce Berkowitz has about 800 million in GS. Jim Simons initiated a brand new $30 million GS position during the second quarter. John Griffin, D.E Shaw and Ken Fisher increased their positions in GS as well.

There are other financial companies trading at lower prices because of low expected growth rates: JPM and BMO. One of the stocks hedge funds are extremely bullish about is JPM. D.E. Shaw increased his holdings by 84% and held $166.7 million in JMP shares at the end of June. Jim Simons also increased his holdings in JMP shares during the second quarter. Ray Dalio also initiated new JPM position.

Another stock that hedge funds heavily invested during the past few months is BMO. Steven Cohen initiated a brand new $1.7 million in BMO shares. Ken Griffin and Jim Simon also hold millions in BMO shares. D.E Shaw increased his position in BMO by 30-fold.

MET is also a promising stock. Ken Griffin holds about $210 billion and John Paulson holds about $190 million in MET shares. D.E. Shaw and Ray Dalio increased their holdings in MET and held $713 million in JNJ shares at the end of June. Jim Simons initiated $20 million MET position.

Usually stocks with higher expected growth rates trade at much higher multiples. Some of the stocks with higher expected growth rates in our list have very attractive multiples. GE, TD, C and WFC deserve a closer look. Insiders are getting bullish about some of these stocks as well.

We like financial stocks and believe that they are indeed trading at attractive multiples. However, if global economy significantly slows down or slips into recession these stocks will definitely get cheaper and that will be a better time to buy.



Disclosure: I am long C.

Source: Top Financial Companies With The Highest Upside Potential