The financial services sector did well in 2021 as the American economy rebounded and as hopes for tighter monetary policy increased. The Fed has hinted that it will implement three rate hikes in 2022 and there are signs that the economy will do better than it did in 2021. So, here are some of the best undercovered financial stocks for 2022.
Northern Trust (NASDAQ: NTRS) is not a company that most Americans know about. But it is a firm that most American millionaires and billionaires know well.
Northern Trust provides a number of services in the financial services industry. Its business is divided into asset servicing, investment management, and wealth management. Its clients include high net-worth individuals, asset managers, sovereign wealth funds, non-profits, and financial advisors among others.
Northern Trust is a well-run company that is in a recovery process. Its revenue dropped to about $5.9 billion in 2020 but it has recovered to more than $6.3 billion in the past 12 months. At the same time, the Northern Trust stock price jumped by 32% in 2021. I expect that it will keep doing well in 2022 as interest rates rise.
Houlihan Lokey (NYSE: HLI) is another financial services company that many Americans have never heard about. Like Northern Trust, it is a company that most people in high finance knows well.
Houlihan is an investment bank that is known for its restructuring services. The company has been involved in some of the biggest bankruptcies in the US. For example, it was the main advisor in the collapse of Lehman Brothers, Washington Mutual, and Enron.
In 2021, the company was selected to advise Evergrande Group, the giant Chinese real estate company. With interest rates set to rise, the company could see its revenue rise as the demand for restructuring rise.
Virtu Financial (NASDAQ: VIRT) is another financial stock that could do well in 2022. The Virtu stock price lagged the financial market as it rose by 17% in 2021.
For starters, Virtu Financial is a company that offers market-making services in the US. This simply means that it executes most trades that people implement in platforms like Robinhood and Schwab. It then makes money from the difference between the spread that exists between the bid and ask prices.
Virtu stock price lagged because of the regulatory concerns about the industry. Still, these concerns will likely ease in 2022 and push the stock higher.