William Blair & Company, a financial services firm based in Chicago, selects and publishes top stock picks every year. However, the five financial stocks suggested by William Blair last year suffered large losses. This year William Blair is looking more closely into the financial sector focusing on financial technology and specialty finance. Here is a list of 7 stocks recommended by William Blair for its 2012 top financial stock picks.
Visa Inc. (V) is a global credit card company. William Blair says “the company will continue to capitalize on the electronic payments secular growth trend”. William Blair believes Visa Inc. has a strong balance sheet and cash flow statement, while we like the stock because of its 0.51 beta. Visa Inc. is now priced at $97.44. The stock has gained 40% so far in 2011. It trades at a forward P/E of 16.88 and has an expected EPS growth rate of 16%. Additionally, the company has a 0.9% dividend yield. John H. Scully’s SPO Advisory Corp owned the most in Visa during the third quarter, with 7.37 million shares. Besides, Warren Buffett's Berkshire Hathaway initiated a new position of 2.29 million shares in the company in the third quarter.
MasterCard Inc. (MA) has gained 62% so far in 2011. Analysts believe MasterCard will continue to earn from electronic payments. Just like Visa, MasterCard can substantially benefit from the high barriers to entry. Currently the stock trades at a 19.5 forward P/E, indicating it may slightly be overvalued when compared with Visa. MA’s EPS is expected to grow at 16%, the same as Visa’s. Chase Coleman’s Tiger Global Management was bullish about the stock. The firm had 7.71 million shares at the end of September. Andreas Halvorsen’s Viking Global also initiated a notable position of 7.62 million shares in MA during the third quarter.
Aon Corp (AON) is a risk management services provider. AON may reveal significant rewards since it will merge with Hewitt in 2012. AON is trading at a forward P/E of 13.64 and has an expected EPS growth of 8.3%. In addition to the upside potential, AON has a 1.3% dividend yield. In the third quarter, Boykin Curry’s Eagle Capital Management had 10.67 million shares in AON.
Wright Express Corp (WXS) engages in the vehicles related information management products and services. WXS returned 14% year to date, and has a 14.77 forward P/E. William Blair believes the prepaid card service will give the company sustainable competitive advantage in 2012. The stock pays no dividend and its EPS is expected to grow by 13% annually over the next five years. Among the hedge funds we track, Glenn Fuhrman and John Phelan’s MSD Capital had 1.79 million shares in WXS at the end of the third quarter.
Higher One Holdings, Inc. (ONE) provides technology and payment services to the higher education industry. William Blair likes ONE because the company has a predictable business model and a solid cash flow. ONE has lost 9% in 2011. The stock has a 30.71 forward P/E, which is far above the industry average. Its EPS is expected to grow at 27% over the next five years. Alec Litowitz and Ross Laser’s Magnetar Capital had 107 thousand shares in the stock at the end of the third quarter.
DFC Global Corp (DLLR) serves unbanked and under-banked consumers. William Blair believes “DFC is well positioned to provide alternative financial services to the 2.5 billion underserved/underbanked consumers worldwide.” However, DLLR plunged after the second quarter and its previous uptrend was eroded. Now the stock lost 5% and is trading at a 8.55 forward P/E. DLLR is expected to grow its EPS at an 18% annual rate over the next five years.
Crawford & Co. (CRD.B) is the largest claims management solutions independent provider. William Blair says the company may benefit from improving claims trends in 2012. CRD.B returned 66% so far this year, and the company is expected to grow its EPS by 12.5% annually over the next five years. The stock also has a dividend yield of 1.40%.