As we near the end of summer and get ready for fall, it's a good time to take a look at your portfolio and think about some long-term opportunities you can invest in before the year's end. The market's decline this year means there are plenty of compelling investments that are trading at attractive levels, making for appealing entry points for long-term investors.
The financial sector is a great place to look, and you can split a $5,000 investment among these companies and own three blue-chip stocks with strong businesses, attractive valuations, and compelling dividend payouts, all operating in different segments of the financial industry.
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1. Blackstone Group
While you may not be an institutional investor or a high-net-worth individual who can invest in one of Blackstone Group's (BX 2.56%) deals or funds, that doesn't mean you can't benefit from putting some money to work in Blackstone's stock. Shares of this top alternative asset manager with over $940 billion in assets under management look like a compelling buy these days, trading about 30% below their 52-week high with a dividend yield of more than 4.5%.
As an alternative asset manager, Blackstone invests in asset classes that are difficult for the average retail investor to access, such as real estate and private equity, so I like the fact that shares of Blackstone give you exposure to these types of investments all under one roof. Blackstone's holdings include thousands of single-family homes in the U.S., a stake in the Great Wolf Lodge chain of water parks and resorts and stakes in prominent consumer brands. Blackstone is also in the process of acquiring publicly traded REIT American Campus Communities, which focuses on student housing, and taking it private.
An investment in Blackstone is also a thematic play on a simple but major tailwind. In the past, large institutional investors often allocated 5% of their money toward alternative managers, whereas today, many have allocations of 25%. Chief Executive Officer Bruce Flatt of Brookfield Asset Management (BN 1.40%) -- a Blackstone competitor -- notes that in an environment with low growth and low interest rates, this number could reach 50% or more as large institutional investors look for new places to earn market-beating returns.
Blackstone certainly looks like it is taking advantage of this momentum, with $88 billion in capital inflows during the second quarter of 2022 (its second-highest quarter ever) and a massive $340 billion over the past year. This would mean trillions of dollars of inflows for Blackstone and its fellow alternative managers, leading to more assets under management, more fees, more revenue, and more returns to shareholders.
2. Goldman Sachs
Shares of iconic investment bank Goldman Sachs (GS 1.07%) look like a serious bargain right now, trading at just 7.5 times earnings, its cheapest valuation in years. Shares are down 12% year to date, and the main concern seems to be that market volatility has depressed initial public offerings and mergers and acquisitions, the bread and butter of Goldman's business. But at some point, the market will heat up again, and Goldman is in the pole position to capitalize. At the same time, Goldman Sachs is also more diversified now than it was in the past, with a growing consumer business that CEO David Solomon is aiming to grow from $1.5 billion to $4 billion in revenue by 2024.
In the meantime, Goldman Sachs is paying out a dividend yield of almost 3%. The company recently ramped up its payout from $2 per quarter to $2.50 per quarter for the dividend it will be paying in August. The quarterly payout is now double what it was in 2021, making Goldman Sachs an exciting dividend growth stock.
3. T. Rowe Price
As a traditional asset manager, T. Rowe Price (TROW 0.77%) may not be as exciting as Blackstone or Goldman Sachs in terms of the market segments it is involved in. But what is exciting is its long-term history of performance, its market-leading position in retirement and mutual funds, and the dividend payout that it has been increasing for 36 years, making it a Dividend Aristocrat. This dividend currently yields almost 4%.
Shares of the 85-year-old asset manager are down 37% this year, as the stock market's decline has led to a decline in assets under management as well as some outflows as clients pull money out of the market. But this also gives investors an opportunity to start a position in this best-in-class company at an attractive valuation of just 12 times earnings. As the market rebounds, T. Rowe Price will be a key beneficiary as AUM builds up and capital flows back in.
Put $5,000 to work in financials
Taking a few thousand dollars and putting it to work in this diversified basket of financial stocks will give you exposure to exciting parts of the market ranging from private equity to investment banking to asset management. You'll own world-class companies that are at the top of their respective fields at reasonable valuations, and all will pay you a steady stream of market-beating dividends.
