Best Long Term Financial Stock Pick

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Mar 22, 2015

The financial sector is one of the most fluctuating industries in the market today. Many players have reported some disappointing results and this sector is going through a sluggish phase overall. However, what is promising to note is that, there are brighter days ahead for this industry. There are quite a few financial sector stocks that might not look too great now but are wonderful choices for the next two decades at least. Let us now see some stocks which are good to buy now and keep holding for another 25 years at least.

Future opportunities galore

The payment processing industry did have its share of problems in the recent past. Many strong players were intimidated by the Apple (AAPL, Financial) Pay. Many giants lost their market shares and the future was indeed looking gloomy for most of them. Amidst all these problems and challenges, one company managed to keep its head high. It was none other than the payment processing giant, MasterCard (MA, Financial). MasterCard has been deriving most of the benefits because of its role as a core payment processor and not as a lender. Most of the lending businesses have experienced huge losses in the last few years due to fall in the economy and increasing number of loan defaulters.

Another important factor which makes MasterCard a promising stock to buy now and hold for the next 25 years is that the future is looking very bright for the company. Though technology has penetrated deeply into all the fields today, around 85% of the transactions are still done through cash by customers. This gives MasterCard a huge market to explore, especially in emerging markets like Asia and Middle East. With a comfortable capacity to generate free cash flow and innumerable growth opportunities in the future, MasterCard should be one of your first choices when you are looking for a financial stock that will stand you in good stead for the next 25 years. Trends of share price movement of MasterCard are seen below:

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Cashing in on high employment rates

The next stock that looks great to hold for another 25 years is Paychex (PAYX, Financial), the company which most organisations in the US resort to, when they want to process payrolls for their employees. The US economy is looking great and the employment rate is at all-time high now. All the sectors are growing phenomenally well and this gives Paychex lots of scope to grow in the future. The other point is that Paychex receives money from companies well in advance before the companies actually process the payment to their employees.

Money stays with Paychex for a particular amount of time and it uses this amount very well by investing in securities and bonds, because the lending rates are very low right now. Thus Paychex benefits a lot from the high employment rates currently prevailing, all-round growth in the economy and the trust that companies place in it. With the current dividend yield of 3.1% and lots of opportunities reckoning in the future, Paychex looks like a safe bet to invest your money in, right now. Historic share price movement of the company for the last few years are seen below:

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Conclusion

It requires lots of skill to find out stocks that will provide you great long term returns, from the bundle of stocks available in the stock market. To make a wise choice, you should keep following the patterns of stock prices and the way companies react to various market factors. If a company is from a growing sector, has shown considerable increase in share prices over the last year or so, has managed to come up strong during adversities and has a huge window to grow in the future, then that is where you have to put your money in. Both the stocks discussed above belong to that category.