A close-up of a hand depositing a check into a bank ATM.
Methodology:
We sifted through holdings of bank ETFs and financial media covering bank stocks to form an initial list of 20 bank stocks. Then we selected the 7 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
7. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Investors: 59
Nu Holdings Ltd. provides digital banking services. Several financial services are available through it, including rewards, mobile payments, business accounts, credit cards, personal accounts, investments, personal loans, and insurance. Brazil is where the company generates the majority of its revenue.
The digital banking platform is accessible in Uruguay, the United States, Germany, Argentina, Brazil, Mexico, and the Cayman Islands.
NU’ Q2 FY24 adjusted net income increased to $563 million from $263 million in Q2 of the previous year, with a 65% YoY jump in revenues pushed by 5.2 million new clients, 25% higher than last year. The digital banking services provider has also experienced growth as a result of its successful entry into Mexico and Colombia, where notable deposits have solidified the company’s standing as a leading digital banking platform in Latin America. However, analysts believe there’s still a risk associated with currency fluctuations despite excellent development.
Nu Holdings Ltd. (NYSE:NU) stock is grabbing the attention of financial analysts. Highlighting excellent growth, improved asset quality, and strategic development in Mexico, Morgan Stanley reiterated its Overweight rating on the financial firm with a $16 price objective. It is anticipated that the acquisition of AI startup Hyperplane will improve client segmentation and increase revenue per customer.
Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets.”
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 107,118,784 shares worth $1,380.76 million.
6. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Investors: 62
Morgan Stanley (NYSE:MS) is a multinational investment bank with roots dating back to 1924 through its legacy companies. The company’s three business segments are institutional securities, wealth management, and investment management. Institutional securities account for about 45% of net revenue, wealth management for 45%, and investment management for 10%. The revenue from outside the Americas accounts for about 30% of the total. At the end of 2023, the firm employed about 80,000 employees and had over $5 trillion in customer assets.
Since switching from investment banking to wealth management, MS has established a more reliable business model, which will significantly affect the company’s long-term success. Investment banking is capital intensive, and many banks, particularly European investment banks, have struggled to make appropriate returns in that area and have purposefully reduced their scope. Nonetheless, the investment bank firm has expanded its market share while remaining committed to investment banking. In its institutional securities division, the company saw significant returns on equity of almost 16% in 2020 and 20% in 2021, although over the past ten years, the average was only about 11%.
Despite volatility associated with its Wealth Management division, Morgan Stanley (NYSE:MS) stock has risen by more than 37%, from $70 in January 2021 to $97 today. In 2024, the stock returned just more than 3%, underperforming the broader market’s 14.43% growth by 11.43%.
Revenue during the entire second quarter of 2024 exceeded experts’ forecasts, coming in at over $15 billion, a 12.39% YoY rise. Revenue for the Wealth Management segment increased to $6.8 billion in Q2 2024 from $6.6 billion in the previous year. The bank’s net new asset addition was $36.4 billion, far less than the $89.5 billion it added during the same period last year. Recent high earnings performance has also been attributed to operating leverage.
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 21,814,109 shares worth $2.12 billion.
5. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Investors: 68
One of the top asset management and investment banking companies in the world is The Goldman Sachs Group, Inc. (NYSE:GS). Investment banking accounts for about 20% of its revenue, trading for 45%, asset management for 20%, wealth management for 15%, and retail financial services for 15%. The Americas account for over 60% of the company’s net revenue, followed by Asia at 15% and Europe, the Middle East, and Africa at 25%.
The projects that GS has been working on over the past few years are being refocused. It highlighted three priorities at its investor day in 2023. It aims to increase customer wallet share and expand its financing business in its trading and investment banking operations. It also plans to boost its management fees in asset and wealth management, particularly in wealth management, and raise outside funding for its alternative business. Its goal with its new platform company is to grow and turn a profit.
After the bank stopped its consumer banking projects, including a $470 million loss from the closure of its Marcus loan, the stock recovered during the previous year.
The company announced $12.73 billion in revenue, a 21.10% YoY growth, and $3.04 billion in net income for Q2 2024. The growth was driven by its strong performance in its Asset & Wealth Management and Global Banking & Markets segments. In each of these categories, revenue growth was 27% and 14% YoY, respectively.
Ariel Appreciation Fund stated the following regarding The Goldman Sachs Group, Inc. (NYSE:GS) in its Q2 2024 investor letter:
“Shares of global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), also rose in the period following solid earnings results, highlighted by strength in fixed income, currencies 1 Sindreu, Jon. “The Second Quarter Split the Market.” The Wall Street Journal, July 1, 2024, p. B9. and commodities (FICC) as well as equities trading and better-than-expected investment banking fees. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and working to improve profitability in Platform Solutions by 2025. With the possibility of increased capital requirements from its regulators, GS plans to reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
A buy rating for Goldman Sachs with a $571 price target was confirmed by Jefferies analyst Daniel Fannon, who cited the company’s solid performance in its alternatives business and anticipated margin increase. According to Fannon, new initiatives and fee hikes would enable GS to boost its operating margin in Asset & Wealth Management from 23% in H1 2024 to a mid-20% by early 2025.
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 5,658,587 shares worth $2.36 billion.
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Publish date : 2024-09-06 03:24:00
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