Many financial stocks swooned in 2022 and 2023 as inflation, rising interest rates, geopolitical conflicts, and other macro headwinds shook the markets. But in 2024, some of those stocks stabilized with the Federal Reserve's three interest rate cuts.
This year, the Fed is expected to cut its rates at least two more times. The financial sector could still face unpredictable challenges from tariffs and geopolitical tensions, but it could be smart to buy a few resilient winners today as long-term plays.
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So even if you only have $200 to invest right now, I think it's a good idea to nibble on these three resilient financial stocks through fractional trades: S&P Global(NYSE: SPGI), American Express (NYSE: AXP), and Nu Holdings(NYSE: NU).
1. S&P Global
S&P Global provides financial data, credit rating, and analytics services for all the Fortune 100 companies and 80% of the Fortune 500 companies. Its platform is widely used by banks, insurance companies, corporations, universities, and institutional investors. It's also been integrating new artificial intelligence (AI) tools, including its Spark Assist generative AI co-pilot, to accelerate those tasks.
From 2019 to 2024, its revenue grew at a compound annual growth rate (CAGR) of 16% as its EPS increased at a CAGR of 8%. It maintained that steady growth even though its profits dipped in 2022 and 2023. That two-year decline was mainly caused by rising interest rates, which temporarily throttled debt offerings and the growth of its credit ratings business, as well as the divestiture of its engineering solutions business in 2023.
From 2024 to 2027, analysts expect S&P Global's revenue and EPS to grow at a CAGR of 7% and 14%, respectively, as interest rates decline, the debt market stabilizes, and more organizations use its AI-powered analytics tools to make more efficient decisions. Its stock might not seem cheap at 38 times this year's earnings, but its evergreen business model, wide moat, and predictable growth rates justify its premium valuation.
2. American Express
American Express controls a smaller slice of the card processing market than Visa and Mastercard. But unlike those two market leaders, which don't actually issue their own cards or take on any debt, American Express is a bank and card issuer that processes payments and backs its cards with its own balance sheet.
That business model forces American Express to only issue its cards to higher-income and low-risk customers, which insulates it from economic downturns. It's also resistant to interest rate swings, since high interest rates boost its banking segment's net income as low interest rates drive its cardholders to make more purchases.
From 2019 to 2024, American Express' revenue and EPS grew at a CAGR of 10% and 12%, respectively, even as the pandemic and other macro headwinds rattled the global economy. From 2024 to 2027, analysts expect its revenue and EPS to rise at a CAGR of 8% and 12%, respectively. Its stock still looks like a bargain at 19 times this year's earnings, and it should continue growing at a steady rate for decades to come.
3. Nu Holdings
Nu, which is based in Brazil and also operates in Mexico and Colombia, is the largest digital-only direct bank in Latin America. Its total number of customers more than tripled from 33.3 million at the end of 2021 to 114.2 million at the end of 2024. Its activity rate (active customers divided by total customers) rose from 76% in 2021 to 83% in 2024.
From 2021 to 2024, Nu's revenue grew at a CAGR of 89%. It also turned profitable in 2023, and its net income nearly doubled in 2024. That rapid growth was driven by the expansion of its ecosystem, with more checking, credit card, lending, insurance, investment, cryptocurrency, and business-oriented services. It also tethered more merchants to its Nu Shopping e-commerce app, and it's been rolling out more AI tools to support its analytics tools, chatbots, and cybersecurity services.
The World Bank estimates that over 70% of Latin America's population is still unbanked, so Nu still has plenty of room to grow. As a digital-only bank, it can expand much faster than its regional brick-and-mortar competitors.
From 2024 to 2026, analysts expect its revenue and EPS to grow at a CAGR of 29% and 38%, respectively. Those are stellar growth rates for a stock that trades at just 21 times this year's earnings.
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American Express is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard, S&P Global, and Visa. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
