2 Financials Stocks on Our Watchlist and 1 We Brush Off

Financial firms serve as the backbone of the economy, providing essential services from lending and investment management to risk management and payment processing. But uncertainty about fiscal and monetary policy has tempered enthusiasm, limiting the industry's gains to 1.5% over the past six months. This return lagged the S&P 500's 9.7% climb.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here are two financials stocks boasting durable advantages and one we're steering clear of.

Founded in 1994 with a focus on autonomous investment teams and a "high-value-added" approach, Artisan Partners (NYSE:APAM) is an investment management firm that offers actively managed equity and fixed income strategies to institutional and individual investors.

Why Do We Think APAM Will Underperform?

Sales trends were unexciting over the last five years as its 2.8% annual growth was below the typical financials company

Earnings per share fell by 1.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

Artisan Partners is trading at $32.75 per share, or 8.7x forward P/E. Read our free research report to see why you should think twice about including APAM in your portfolio, it's free.

With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE:FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.

Decent 10.2% annual revenue growth over the last two years beat most of its peers, showing customers find value in its products and services

Share repurchases have increased shareholder returns as its annual earnings per share growth of 21.1% exceeded its revenue gains over the last two years

At $56.04 per share, Federated Hermes trades at 9.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it's free.

Founded in 1971 as a disruptive force challenging Wall Street's high fees and limited access, Charles Schwab (NYSE:SCHW) is a wealth management and brokerage firm that provides investment services, banking, and financial advice to individual investors and independent advisors.

Annual revenue growth of 20.2% over the last two years was superb and indicates its market share increased during this cycle

Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

ROE punches in at 16.2%, illustrating management's expertise in identifying profitable investments

Charles Schwab's stock price of $94.52 implies a valuation ratio of 12.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it's free.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.