This year has actually started off quite well in the hopes that interest rates will finally stabilize. The inflation report was encouraging, building on this sentiment The annual inflation rate slowed for the sixth straight month to 6.5% in December 2022 with gasoline and used cars the major contributors. Moreover, the monthly decline of 0.1% was the first since May 2020, driven by energy and used cars. Food and shelter prices continued to increase.
All the major indexes have risen since the beginning of the year and the conversation is shifting from recession to revival of the economy.
This is great news for the stock market because it means that money is going to flow back in, which will in turn raise share prices. Therefore, this is when we should be following the market as closely as possible, because there is the chance that we could make some big gains.
ING, Interactive Brokers, HSBC, ageas SA/NV and NatWest from the Finance sector have been on the rise since October. And even if interest rates stabilize, at these levels, they’re still positive for these stocks. Therefore, there’s reason to believe that they can go higher:
ING Groep N.V. ING
ING Groep is a financial institution providing retail, wholesale and corporate line banking solutions and services to its customers who are spread across the Netherlands, Belgium, Germany, Poland, Rest of Europe, North America, Latin America, Asia and Australia.
The Zacks Rank #1 (Strong Buy) stock belongs to the Banks – Foreign industry, which is in the top 10% of Zacks-classified industries. This is the perfect combination of a Rank #1 stock in the top 50% of industries and has historically been seen to have an outsized chance of near-term share price appreciation.
Analysts are extremely optimistic about its growth prospects this year. Their revenue estimates represent 14.0% growth this year and earnings estimates represent 64% growth this year.
The shares are up over 53% in the last six months and over 15% in the last month, but remain nearly 30% off their high point over the past year. Their valuation of 8.35X P/E and 0.62 PEG also indicate that the shares are set to move higher.
Interactive Brokers Group, Inc. IBKR
Interactive Brokers is an automated electronic broker with worldwide operations. The company specializes in executing, clearing and settling trades in stocks, options, futures, foreign exchange instruments, bonds, mutual funds, exchange traded funds (ETFs), metals and cryptocurrencies.
The Zacks Rank #1 stock belongs to the Financial - Investment Bank industry (top 13%). Therefore, there is strong upside potential in the shares.
Analyst estimates reflect this view. For the year ending in December 2023, analysts expect revenue growth of 22.5% and earnings growth of 26.9%.
The shares are up 40.0% in the last six months and 11.1% in the past month. But since they are still 12.3% off their 52-week high and valuation of 15.53X P/E and 0.72 PEG is not expensive, there is a good chance of further upside.
HSBC Holdings plc HSBC
HSBC Holdings provides banking and financial services worldwide. The company operates through Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets segments.
The Zacks rank #2 (Buy) stock belongs to the Banks - Foreign industry, which as discussed above is a combination that indicates upside for HSBC.
Analysts expect the company to grow its earnings by 31.4% this year on revenue hat they expect will grow 9.8%.
Despite the strong growth prospects, the shares trade at 7.46X P/E and 0.62 PEG. Therefore shares may be reasonably expected to appreciate (they have increased 16.6% in the last six months and 21.0% in the past month).
ageas SA/NV AGESY
ageas SA/NV sells property, casualty and life insurance products, as well as pension and reinsurance products in Europe and Asia.
The Zacks Rank #2 (Buy) ranked stock belongs to the Insurance - Multi line industry (top 13%). Therefore, like ING, it is likely to move higher.
Analysts too are positive about its prospects. Although we do not have their revenue estimates, the earnings estimate represents an 11% increase from 2022 levels.
The shares are up 13.5% in the last six months and up 9.7% in the last month, but still off more than 38% their annual high. Given the valuation of 9.4X P/E and 0.81 PEG, it’s safe to say that there’s room for further upside.
NatWest Group plc NWG
NatWest provides banking and financial products and services to personal, commercial, corporate and institutional customers in the United Kingdom and internationally. It operates through Retail Banking, Commercial Banking, Private Banking, RBS International, and NatWest Markets segments.
The Foreign Bank stock has a Zacks Rank #2.
It is expected to grow revenue and earnings a respective 8.1% and 30.4% in 2023.
The shares are up 27.4% in the last six months and 16.1% in the past one month. They’re off 4.84% their annual high. Since the valuation of 6.13X earnings and PEG of 0.19 is very low, there seems to be a fair chance of upside.
6-Month Price Performance
Image Source: Zacks Investment Research
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