4 Ultra-Safe Stocks for 2023

·4-min read

The Foreign Banks industry has traded more or less in line with the S&P 500 over the past year. But with central banks raising rates across the world, this is likely to be one of the safe havens for investors this year. That’s because the higher rates will allow the banks to earn more on their deposits.

A recession normally encourages people to hold larger cash balances as the equity markets begin to look riskier. When interest rates are also higher, holding a bit of cash can make more sense for some. And this too is positive for banking companies. On the flip side, if the recession is deep or protracted, there’s the chance that loan demand will fall, thus adversely impacting the business.

Since many people are resigned to the fact that there will be a recession and since the Fed seems far from its goal of 2-3% inflation, the current environment of higher rates and riskier markets can prevail for longer than we would like. On the other hand, labor markets remain tight. Therefore, on the one hand, deposits are likely to remain relatively strong and loan demand somewhat softer (depending on just how much business is affected).

This is, overall, a favorable scenario for foreign banks, four of which have qualified for today’s post. They are Sumitomo Mitsui Financial Group, Mizuho Financial Group, Barclays and Banco do Brasil. The industry has traded more or less in line with the S&P 500 over the past year, but has pulled ahead since December as investors moved in.

An industry (Banks – Foreign) that carries a Zacks Rank of #28 (top 11%) is seen as positive here at Zacks because historically, Buy-rated stocks belonging to the top 50% of Zacks-classified industries have almost always outperformed the rest. And of course, the higher up in the ranks the better.

Large-cap stocks are in any case more stable in economic uncertainty, especially when they belong to relatively attractive industries.

And the final point that makes these stocks ultra-safe is supportive expert opinion. Therefore, today’s selection also considers an average broker rating of at least #2, i.e. those stocks to which brokers have allotted a Strong Buy or Buy rating.

So here goes:

Sumitomo Mitsui Financial Group, Inc. SMFG

Sumitomo Mitsui Financial Group provides commercial banking, leasing, securities, consumer finance and other services in Japan, the Americas, Europe, the Middle East, Asia and Oceania.

The shares carry a Zacks Rank #2 (Buy) and a Value Score of B. They’re trading at a 43% discount to the S&P 500 (based on P/E).

The average broker rating of 1.00 translates to Strong Buy. Revenue growth estimates for the year ending March 2024 aren’t available, but earnings estimates represent 6.2% growth. They’ve also increased a penny in the last 60 days.

The company also pays a dividend that yields 3.46%, which is highly desirable in a down market where loss-making is easy.

Mizuho Financial Group, Inc. MFG

Mizuho Financial Group provides banking, trust, securities and other financial services in Japan, the Americas, Europe and Asia/Oceania.

The Zacks Rank #2 company has a Value Score B. The shares are trading at a discount of more than 49% to the S&P 500.

The average broker rating of 1.67 translates to a Buy. Like Sumitomo Mitsui, we don’t have revenue estimates for Mizuho Financial and earnings estimates for the year ending March 2024 represents growth of 6.1%. The 2024 estimate increased a penny in the last 60 days.

Its dividend yields 3.14%.

Barclays plc BCS

Barclays provides various financial products and services financial services, such as retail banking, credit cards, wholesale banking, investment banking, wealth management, investment management and securities dealing services in the United Kingdom, Europe, the Americas, Africa, the Middle East and Asia. The company operates through Barclays UK and Barclays International divisions.

The Zacks Rank #1 (Strong Buy) stock carries a Value Score B. The shares are trading at almost a 70% discount to the S&P 500.

The average broker rating of 1.50 translates to a Buy Rating. The company is expected to grow its revenue 5.6% in 2023 although earnings are expected to drop 5.1%. Analysts polled by Zacks have taken their 2023 estimates up 13 cents in the last 60 days.

Barclays also pays a dividend that yields 2.39%.

Banco do Brasil S.A. BDORY

Banco do Brasil S.A. provides banking products and services for individuals, companies and the public sector in Brazil and internationally.

The Zacks Rank #2 stock carries a Value Score A. Its current valuation is a nearly 82% discount to the S&P 500.

The average broker rating of 1.00 shows that brokers are strongly recommending the shares. The Zacks Consensus Estimate for 2023 represents a 5.9% increase from 2022. The revenue estimates is unavailable. The 2023 estimate has jumped 7 cents in the last 30 days.

Banco do Brasil’s dividend yields 2.92%.

One-Year Price Performance

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Barclays PLC (BCS) : Free Stock Analysis Report

Mizuho Financial Group, Inc. (MFG) : Free Stock Analysis Report

Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report

Banco Do Brasil SA (BDORY) : Free Stock Analysis Report

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