With so many equities having a rocky start in 2022, investors who want to put their money to work need to be even more cautious at this time. The equity market is becoming increasingly divided as value stocks outperform growth stocks owing to the complex issues surrounding the Federal Reserve and the economy. This could be a pattern that continues throughout the next few months, therefore it's critical to concentrate on industries with reasonable valuations and good performance.
Several arguments advocate adding shares of the best bank stocks right now, including a strengthening economy and forthcoming interest rate hikes from the Fed. It's also worth noting that many of these bank stocks have been consolidating their 2020 gains for months, suggesting that investors are accumulating shares for what may be another leg up.
These are businesses with solid dividends, excellent balance sheets, and appealing P/E ratios when compared to the S&P 500 that might well be worth adding in the weeks ahead.
Here are 3 best-of-breed bank stocks to invest in now:
Bank of America (NYSE: BAC)
Bank of America stock is probably the greatest way to play rising interest rates if you're an investor who expects the Federal Reserve to act swiftly to combat inflation. That's because it is one of the most profitable banks in the sector, with a high level of Net Interest Income versus competitors, which indicates that Bank of America's income would rise the most if interest rates rose. It's also a firm with one of the most well-known brand names in consumer banking, with a network of retail offices and services that is unrivaled.
There's a lot to like about the firm's Global Wealth & Investment Management segment, which grew 16.8 percent year over year net revenue in Q3. It's no secret that more well-off and wealthy clients are putting their faith in Bank of America stock than ever before, with total client funds recently reaching an all-time high of $3.69 trillion. Finally, the fact that Bank of America stock is breaking records not seen since the early 2000s suggests there is a lot of interest in the market, which is filled with uncertainty.
Morgan Stanley (NYSE: MS)
For investors looking for sector exposure, Morgan Stanley stock is an excellent choice since its operations in investment banking, securities, and investment and wealth management provide a consistent revenue stream that investors can rely on through thick and thin. With interest rates likely to rise, Morgan Stanley could benefit from this development. The company's revenue may increase as a result of rising interest rates, and risks like inflation and an uneven economic recovery might continue to drive trading revenue higher throughout the year. On January 19th, the firm is likely to report revenue of $14.8 billion, up 26% year over year, in Q3.
Investors should keep an eye on how the stock does leading up to the earnings report, as there's a chance Morgan Stanley stock will break out before it happens after months of consolidation. Keep an eye on investment banking and asset management revenue in Q4, which were strong contributors to the firm's excellent results last quarter and will continue to drive earnings growth following the acquisition of Eaton Vance. Finally, Morgan Stanley's recent two-fold increase in its quarterly dividend and authorized share repurchase program following the Fed's stress test illustrates how best-in-breed financial stocks will continue to reward long-term investors.
JPMorgan Chase (NYSE: JPM)
Last but not least, we have another of the world's largest multi-financial companies, JPMorgan Chase. With more than $3.8 trillion in assets and services in consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management, this is a best-in-breed bank that has earned a strong worldwide presence. It's a firm with significant competitive advantages, such as industry-leading mobile banking and finance technology, excellent operational efficiency, cautious underwriting, and a long track record of success.
JPMorgan Chase stock, will benefit from higher interest rates and a more robust economy. There's also a lot to like about how JPMorgan Chase stock trades at a lower multiple than the other banks on our list.Finally, a 2.42% dividend yield and sufficient capital to invest in growth prospects are additional reasons why it's a smart idea to consider this stock from the financial sector. Remember that JPMorgan Chase's Q4 results will be released on January 14th, which might cause a stock price reaction.