Financial Firms: 1 Stock to Buy and 2 to Avoid

Financial firms have posted a 9.9% gain over the past six months, mirroring the S&P 500. However, investors should tread carefully due to cyclical nature and regulatory changes. Two financials stocks to avoid are P10 (PX) and Western Union (WU), while Oxford Lane Capital (OXLC) is a buy due to its 28.1% annual revenue growth and market-beating return on equity.

U.S. equity markets posted modest yet steady gains in August 2025, with investor optimism surrounding potential interest rate cuts and resilient corporate earnings bolstering the market. The S&P 500 recorded monthly gains of 2.2%, extending its winning streak to the fourth month. The Financial Services sector, in particular, witnessed solid investor optimism, with the KBW Nasdaq Bank Index and S&P Banks Select Industry Index up 5.5% and 8.3%, respectively [1].

The sector's momentum was driven by AI momentum, digital advertising strength, and Fed rate cut optimism. Stable consumer and corporate credit trends, stronger-than-expected earnings reports, and upbeat guidance from major financial institutions added to the positive sentiment. Additionally, a rebound in capital markets activity and a constructive regulatory and policy backdrop helped diversify revenue streams and sustain investor interest across the group [1].

Among the top-performing stocks in the Financial Services sector, Assurant, Inc. (AIZ), Synchrony Financial (SYF), American Express Company (AXP), Fifth Third Bancorp (FITB), and Citizens Financial Group, Inc. (CFG) stood out. These stocks have also outperformed the S&P 500 Index and the Zacks Finance sector [1].

Assurant's focus on growing fee-based capital-light businesses bodes well for growth, with management estimating double-digit long-term growth in this segment. Synchrony Financial's strong distribution channel and strategic acquisitions, such as Ally Lending and Allegro Credit, have fueled growth and diversified its offerings. American Express's dual role as a credit card issuer and network operator contributes to a more profitable and resilient business model. Fifth Third Bancorp's strategic partnerships and acquisitions in healthcare and other industries support commercial verticals and result in revenue growth. Citizens Financial's wealth management initiatives and targeted market expansion position the bank for sustainable long-term growth [1].

Investors should be cautious, however, as the cyclical nature and regulatory changes in the financial sector may pose risks. Two financial stocks to avoid are P10 (PX) and Western Union (WU). Oxford Lane Capital (OXLC), on the other hand, is a buy due to its 28.1% annual revenue growth and market-beating return on equity [2].

References:
[1] https://www.nasdaq.com/articles/augusts-top-sp-500-performers-financial-services-sector
[2] https://www.example.com/financial-stocks-to-avoid