3 Great Financial Stocks for the Long-Term

Here are some excellent investment ideas that should provide excellent growth and income over the decades to come.

Feb 14, 2014 at 7:00AM

When investing, looking past all of the "noise" is one of the most important things you can do.

There are several good options to choose from, but here are three great financial stocks for the next 30 years (and beyond) are Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), and Prospect Capital (NASDAQ:PSEC).

Wells Fargo: In a class by itself
Wells Fargo is quite different from some of the other big U.S. banks. Specifically, they have historically maintained a loan portfolio (along with the rest of their assets) that are of a much higher quality than its peers. This is why they were able to take advantage of the financial crisis by scooping up not-so-fortunate peer Wachovia for a discount. 

Wells Fargo is the largest bank in the U.S. in terms of market cap, and serves about 70 million customers. They have grown their loan portfolio at around 4% annually over the past few years, and have more than $800 billion in loans outstanding at an average yield of about 4.4%, meaning their interest income from their loans is at least $35 billion per year.

In terms of long-term growth prospects, consider these facts: Wells Fargo has increased its tangible book value per share from $7.95 in 2004 to $21.15 currently, an increase of 166% over a decade, or more than 10% per year on an annualized basis. During this time, the company has grown aggressively, increasing its total assets from around $400 billion to over $1.5 trillion. 

Wells Fargo's solid asset portfolio and excellent management -- coupled with a dividend that has been raised every year since the crisis -- should keep this growth going for years to come.

WFC Tangible Book Value (Per Share) Chart

Goldman Sachs: A bet on brains
Like most of the sector, Goldman Sachs has pulled back significantly from its highs, creating an excellent buying opportunity. This is a company Warren Buffett referred to as "a bet on brains" when he invested in Goldman post-crisis, an investment that happened to make him and Berkshire Hathaway a lot of money.

Despite performing very well over the past few years, Goldman is still pretty cheap on both a historical basis and in relation to its projected growth over the next few years. Goldman trades for just 10.5 times the consensus estimates for 2014's earnings, which are expected to rise by almost 20% over the next two years. 

The company has done an excellent job since the crisis in improving as well as growing their assets.  Liquidity on the balance sheet has been boosted significantly since 2009, and total assets have grown by 11%. 

The company's tangible book value has actually grown beyond where it ever was before the crisis, making shares extremely cheap relative to the intrinsic value of the business. As you can see from the chart below, the TBV has risen almost linearly over the past decade, from around $45 in 2004 to almost $150 currently. 

GS Price to Tangible Book Value Chart

Prospect Capital Corporation: An excellent income that is stable
Prospect Capital is a business development company that yields around 12.2% annually and has an excellent dividend history (and future). The company has already declared its $0.11 dividend payment through September, and the actual amount goes up slightly each month:

Prospect and other business development companies (BDCs) make their money by lending to private businesses. The company has a very large and diverse lending portfolio, which means that if one of its loans happens to default, it won't tremendously affect Prospect's bottom line. In fact, as of the most recent quarterly SEC filing, Prospect holds the debt of about 130 different companies.

Looking ahead
This is not meant to be an exhaustive list by any means, and any prospective investment should be researched to determine if it is a good fit for your particular long-term goals and your current risk tolerance. However, these three companies represent an excellent combination of growth potential (Wells Fargo and Goldman) and income (Prospect and Wells Fargo, to a lesser extent).

Nine more high-yield companies
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Matthew Frankel owns shares of Prospect Capital. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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