Three Evergreen Financial Stocks to Buy and Hold

Investing in the stock market can sometimes feel out of reach, especially if you’re starting with a smaller amount of money like $3,000. However, thanks to commission-free trading and the ability to purchase fractional shares, anyone can begin building a diverse portfolio. For those embarking on this investment journey, three strong financial stocks to consider are American Express (AXP), SoFi Technologies (SOFI), and Berkshire Hathaway (BRK.A and BRK.B). Each of these companies has distinct advantages, solid competitive positions, and significant growth potential over the coming years.

American Express

American Express, often known as Amex, functions differently from companies like Visa and Mastercard. While Visa and Mastercard primarily act as payment processors through their networks, American Express issues its own cards and operates its own bank. Although it occupies a smaller segment of the credit card market in comparison to its rivals, this is a strategic choice because Amex focuses on serving higher-income, lower-risk customers.

What sets American Express apart is its resilience to interest rate fluctuations. While increasing interest rates can impact consumer spending, they can also enhance profits in its banking division. Therefore, this diversified approach provides stability, making it a compelling investment choice. Furthermore, American Express is venturing more into international markets, thus minimizing its reliance on the U.S. market alone.

Looking forward, analysts project that American Express will achieve a revenue growth rate of about 8% annually between 2024 and 2027, with earnings per share (EPS) projected to grow at 13%. At a price-to-earnings ratio of 18 and a forward yield of 1.2%, it appears to be a reasonably priced investment.

SoFi Technologies

SoFi, short for Social Finance, aims to provide a comprehensive digital financial experience, potentially changing the way consumers view traditional banking. Offering personal loans, credit cards, insurance, investment options, and estate planning tools, SoFi operates a bank fully online, having obtained its bank charter in 2022.

This digital-only model has notably attracted younger customers, allowing SoFi to grow rapidly compared to traditional banks. Membership numbers skyrocketed from 2.52 million in 2020 to 10.13 million in 2024. Additionally, SoFi’s payment processing arm, Galileo, serves a remarkable 168 million accounts. The company reported profitability under Generally Accepted Accounting Principles (GAAP) in 2024.

Despite facing challenges like the federal student loan freeze and rising interest rates, which affected loan uptake, conditions are changing. With the loan freeze now lifted and potential interest rate cuts on the horizon, analysts expect SoFi to see revenue and EPS growth rates of 19% and 24%, respectively, from 2024 to 2027. Although its current price-to-earnings ratio is 49, analysts note it is more reasonably valued at 14 times projected forward earnings before interest, taxes, depreciation, and amortization (EBITDA). As more Americans turn to digital banking solutions, SoFi could prove to be a valuable growth stock.

Berkshire Hathaway

Berkshire Hathaway, under the leadership of Warren Buffett, offers a straightforward method for investing across a wide array of financial entities. The company is heavily involved in the insurance sector, with ownership of companies like GEICO, Gen Re, and National Indemnity, among others. Its impressive stock portfolio, valued at $284 billion, includes significant investments in firms like Chubb, American Express, Capital One, and Bank of America.

The diversity within Berkshire Hathaway’s investments extends to sectors such as energy, transportation, and consumer goods, contributing to its stability and reliability as a long-term investment. Historically, Berkshire Hathaway has outperformed the S&P 500, showcasing Buffett's effective investment strategies since he took over the company in 1965.

When evaluating its financial performance, Berkshire Hathaway focuses on its operating earnings, which exclude capital gains or losses. This metric has exhibited a substantial growth rate of 16% annually from 1994 to 2024 and is expected to continue advancing, especially as Buffett’s successors embrace similar growth strategies.

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