The financial sector has been experiencing positive growth lately, with the S & P 500 financial sector advancing more than 16% this year and nearly 4% over the past month. This performance has outpaced the broader market, as the S & P 500 and the Nasdaq Composite are both down more than 2% in September. The optimism in the financial sector is largely driven by expectations of a Federal Reserve rate cut later this month, with many believing that this move will help the U.S. economy avoid a potential recession. Lower rates historically have provided a boost to banks, with an average 21% increase in bank stocks following the first rate cut of a cycle.
To identify financial stocks that have the potential to break out, analysts are focusing on specific criteria. Stocks that are members of the S & P 500 financials sector, have a consensus buy rating from analysts, and have an average analyst price target implying at least 10% upside are being closely monitored. Using the CNBC Pro Stock Screener tool, some stocks have emerged as potential winners in the financial sector.
One of the stocks that has been identified as having significant potential for growth is KKR. Shares of KKR have advanced roughly 40% in 2024, and the average price target suggests nearly 17% upside ahead. Redburn Atlantic initiated coverage on KKR with a buy rating, praising the company’s efforts to diversify its business through acquisitions like Global Atlantic. Analysts are optimistic about KKR’s growth prospects, expecting a mid-teens CAGR in assets under management over the next five years.
Wells Fargo is another financial stock that analysts are bullish on. The consumer banking giant’s shares have advanced more than 8% in 2024, with analysts forecasting nearly 16% upside moving forward. Deutsche Bank recently upgraded Wells Fargo to a buy rating, citing an attractive entry point following a pullback in the stock. Analysts believe that recent weakness in Wells Fargo’s stock has created a buying opportunity for investors.
Bank of America is also on the list of potential breakout stocks in the financial sector. The stock has surged about 15% in 2024, and analysts anticipate roughly 17% upside ahead. Deutsche Bank upgraded Bank of America last week, attributing the recent pullback in the stock to Berkshire Hathaway selling its stake. Analysts see this as an opportunity for investors to capitalize on the stock’s growth potential.
The financial sector is showing signs of strength and potential for breakout, despite the broader market’s recent struggles. Stocks like KKR, Wells Fargo, and Bank of America are being closely watched by analysts for their growth potential and attractive entry points. Investors looking to capitalize on the positive momentum in the financial sector may want to consider adding these stocks to their portfolios.