When it comes to the financial sector of the market, most traders look at big banks, credit card companies, and even insurance firms. But there are other parts of the sector that could benefit traders who buy while stocks are out of favor.
One such area is in the asset management space. Companies that cater to providing funds and access to financial markets for individuals and other companies alike tend to trade relatively cheaply to the overall market.
That could soon change, as the sector has been ongoing consolidation in recent years. One company, Franklin Resources (BEN), is currently in the running to expand its operations with a strategic acquisition.
The asset manager grew revenue by 12 percent last year, and earnings by 31 percent. Plus, the company has a solid 22 percent profit margin. Yet shares are down about 7 percent over the past year.
Action to take: Investors may like shares here, as the stock trades at just under 8 times earnings. Plus, the stock yields about 4.3 percent at today’s prices. And with further industry consolidation likely, the company could expand its size and profit margins even further in the years ahead.
For traders, the October $30 calls, last going for about $0.95, offer the potential for mid-to-high double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.