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3 Obvious Financial Stocks to Buy Right Now for Under $500
History shows that long term investors are rewarded for their patience. Those who buy blue-chip companies and hold these investments for the long term have an excellent opportunity to build generational wealth.
A key part of this approach is remaining diversified across multiple market sectors. The financial industry may make us think of banks, but it goes far beyond that, encompassing companies with broad customer bases that offer a range of products and services that help the economy run smoothly.
Meanwhile, online brokerages have made it easier for retail investors to build wealth through the stock market. As a result, investors can start investing for as little as $500. Here are three great financial stocks that can help you get started.
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1. Progressive
Insurance companies can be excellent cash flow machines and Progressive (NYSE: PGR) is one of the best in the industry. The company has a long history of growing its premiums over time while maintaining solid profitability metrics. Over the past decade, progressive policies in effect have grown from 13.6 million to 29.7 million.
Even better, the company has been an effective hedge against the inflationary pressures that emerged in the economy just a few years ago. From 2021 to 2023, its policies in force grew by 12%, while net premiums written increased by 33%, illustrating the insurer’s strong pricing power.
Progressive is positioned to grow during an inflationary environment, but it also benefits from an expanding economy, which it does most of the time. Over the past 70 years, the US has only been in recession 15% of the months.
Not only that, but it also makes money from its huge investment portfolio, which has been raking in more money thanks to higher interest rates. At the end of the first quarter, Progressive’s investment portfolio was valued at $69 billion and yielded $612 million in net investment income, a 47% increase over last year.
2. PayPal
PayPal (NASDAQ: PYPL) is just a few years away from being Wall Street’s darling growth stock. The company crushed it during the pandemic and saw incredible growth across its business as more people switched to digital payments. However, its growth story collapsed as management tempered expectations. Now, under the guidance of new CEO Alex Chriss, PayPal will try to get things back on track.
PayPal continues to see solid revenue growth and its income recovered well last year. However, investors are increasingly concerned about their utilization rate, or the total revenue retained on each transaction, which has has decreased every year since 2015. The fall in the interest rate results from its break with eBayalong with a lower acceptance rate on Venmo and its unbranded checkout option, Braintree.
The story continues
Chriss, who previously worked as executive vice president and general manager of Intuit’s small business and self-employed group, is looking to upgrade PayPal’s offerings for these businesses with PayPal Complete Payments. The company, which has a large volume of customer transaction data, is also launching its own advertising network, which could be another growth engine for fintech.
PayPal’s recovery will take time and the company has called this a year of transition. If you’re willing and able to wait, PayPal looks like an incredible bargain today, trading at 15.9 times earnings and 2.3 times sales.
3. Morgan Stanley
Things have been tough for investment bankers in recent years. After a record 2021, led by robust demand for initial public offerings (IPO) and a flurry of mergers and acquisitions (M&A), investment banking activity came to a screeching halt.
While Morgan Stanley (NYSE:MS) has been able to rely more on its asset and wealth management businesses, investment banking still represents a significant part of its business.
High inflation and, more specifically, rising interest rates, have resulted in market volatility throughout 2022, which has caused many companies to suspend IPO plans. As a result, investment banking revenues have plummeted across the industry.
According to professional services firm EY, things appear to be changing. In the first quarter, there were 38 IPOs, with companies raising revenues of US$8.7 billion. This number is higher than last year, when there were 33 IPOs but only $2.6 billion in proceeds. The company said the IPO pipeline has been in the works for two years and has been “encouraged by the improving IPO market.”
In the first quarter, Morgan Stanley’s investment banking revenues increased 16%, thanks to strong equity underwriting revenues from IPOs and robust debt underwriting. M&A is also expected to increase, with CEO Ted Pick telling investors: “The pipeline is clearly growing” and the company is in the “first steps of a multi-year M&A cycle.”
With an improving outlook for equity and debt underwriting and more constructive M&A activity, now could be an excellent time to acquire Morgan Stanley shares, which are reasonably priced at a forward P/E ratio of 14.3.
Should you invest $1,000 in Progressive now?
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Courtney Carlsen has positions in Morgan Stanley, PayPal and Progressive. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends Progressive and eBay and recommends the following options: $52.50 July 2024 short calls on eBay and $67.50 June 2024 short calls on PayPal The motley fool has one. disclosure policy.
3 Obvious Financial Stocks to Buy Right Now for Under $500 was originally published by The Motley Fool