3 Financial Stocks to Buy in August and Add on Dips

Stocks to buy

Investors continue to seek out top financial stocks to buy, as the macroeconomic winds appear to be shifting. Federal Reserve chairman Jerome Powell all but served up a rate cut in September on a golden platter on Wednesday at the highly-anticipated Q&A session following the July interest rate session.

At this press conference, the chairman reiterated that the Fed is seeing signs that inflation is moving toward its target, and it may be time to start dialing down restrictive monetary policy. That means rate cuts, and the market appears to be implying it may mean more than one this year.

For certain financial stocks to buy, that’s a great thing for a number of reasons. Net interest margins should improve (the spread between the rate at which banks typically borrow and the rate at which they lend). And capital ratios and other metrics should get a boost as well. Additionally, valuation multiples for higher-growth fintech stocks should see a boost from such an environment.

In this potentially lower-rate environment, here are three financial stocks to buy I think are worth focusing on right now.

JPMorgan (JPM)

Source: Roman Tiraspolsky / Shutterstock.com

This past quarter was certainly a positive one for JPMorgan Chase (NYSE:JPM). According to its CEO Jamie Dimon, JPMorgan has exceeded market estimates and analyst expectations, but the company also issued general caution.

Despite having interest concerns around where the economy could be headed, JPM stock flourished in its Q2 2024 numbers. The company reported $50.2 billion in revenue, surpassing the $42.23 billion consensus estimate number for the quarter. The bank also saw a $18.1 billion profit, exceeding its $17.3 billion forecast. This marks a significant improvement from 2023’s $14.47 billion figure. 

In recent news, JPMorgan also released a generative AI product similar to OpenAI’s ChatGPT. This tool aims to aid research analysts. The bank’s asset and wealth management employees received access to the LLM Suite for writing, idea generation and summarizing documents. Introduced earlier this year, around 50,000 employees now use it.

SoFi Technologies (SOFI)

Source: Wirestock Creators / Shutterstock.com

For the past 12 quarters, SoFi Technologies (NASDAQ:SOFI)  has been consistently impressing investors with its growth. In its most recent quarter, SoFi Money accounts increased by 61%, and debit transactions surged 150%. Despite trading under $10, SoFi’s revenue rose 35% in 2023, and its customer base grew 44%. The firm expanded services and projected 17.4% revenue growth through 2026. Though facing challenges, SoFi’s digital model attracts young users, ensuring long-term potential in a market dominated by banks with $9.5 trillion in assets.

SoFi evolved from a student loan co-op to a major U.S. bank, growing rapidly despite smaller assets compared to big banks. New members reached 8 million from Q1’s 600,000. The company also saw a 38% rise in products sold, with the company selling over 12 million. This growth led to its first profitable quarter in Q4 2023, with continued profitability expected in 2024.

SoFi’s three segments — lending, a fintech platform for businesses and personal financial services — saw increased product adoption in Q1. Financial services grew 42% year-over-year, driving high growth and profitability. I think this macro environment could certainly be conducive for continued growth moving forward.

PayPal (PYPL)

PayPal (NASDAQ:PYPL) saw its stock decline over the past year, but potential rate cuts could drive a recovery. Lower rates may boost consumer spending and PayPal’s payment volumes. Despite recent sluggish stock performance, PayPal’s business remains strong, with the company’s Q1 report showing a 9% year-over-year sales increase, 14% rise in payment volumes, 18% EPS growth and an 86% increase in free cash flows. At just 1.9-times forward sales estimates, it’s an excellent buy.

Owning companies with competitive advantages is smart, and PayPal has them. Its two-sided platform collects data from both merchants and consumers, enhancing fraud detection. This network effect strengthens its position: widespread acceptance attracts consumers, and merchants join to avoid losing sales.

PayPal’s prospects improved after Apple (NASDAQ:AAPL) was required to share its payment technology due to an EU settlement. This move opens competition opportunities for PayPal. Consequently, Mizuho Securities rated PayPal as “outperform” with a $90 price target.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor held a LONG position in SOFI.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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