The financial sector is “normalizing” after a decisive bullish phase. A bear market might be an excellent opportunity to buy financial stocks you can hold forever at a discounted price.
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A bank stock
Royal Bank of Canada (TSX: RY) is a no-brainer financial sector pick you can hold for decades. It’s not just because of its status as the largest Canadian bank with a massive market share but also because of its compelling and consistent returns.
The stock has risen by about 122% in the last decade, and if we add the dividends, the total returns will climb to 230% for the period. Those returns are comparable to modest growth stocks. It’s also relatively safe, even more so than most other banking institutions in Canada, for multiple reasons, including its revenue mix (significant international revenue streams), local market share, and the investor trust it holds.
Another banking stock
Another banking stock that you might consider buying and holding forever is the smallest of the Big Six banks in Canada—National Bank of Canada (TSX: NA). While it started out as a regional bank based in Quebec and still has a massive footprint in the province, the bank has also grown to other local and international markets.
But far more important and impressive is how the stock has grown over the years. In the last decade, its returns have been—178 % without dividends and over 320% with them. Assuming the bank can sustain this return potential in the long term, these returns accumulating over decades can contribute to a sizable nest egg.
An insurance stock
Intact Financial (TSX: IFC) is one of the few insurance giants trading on the TSX, but it stands out for two reasons. The first is a different focus. While other Canadian insurance giants focus on life insurance, this is a Property and Casualty (P&C) insurance company, one of the largest in Canada, with a sizable presence in the U.K.
The second is its compelling growth potential. While investors usually buy the other insurance stocks for their dividends, Intact Financial is sought after for its growth. It grew over 200% in the last decade, and even though its yield is typically low, the overall returns for the period were over 290% (including dividends).
A private equity stock
For Clairvest Group (TSX: CVG), you don’t have to wait for it to get discounted as it’s already there, trading at an almost 20% discount from its five-year peak. This has done little to push its paltry yield up, which is still just 0.14%. However, its valuation and performance are reasons to buy and hold this financial stock.
The stock returned over 150% without dividends and over 215% with dividends in the last decade. It’s also trading at a price-to-earnings ratio of 12, which is decent enough. Buying it now can help you accumulate significant returns over the years.
A crypto-financial stock
Galaxy Digital (TSX: GLXY) is typically lumped with crypto stocks, and it technically is one, but it’s officially part of the financial sector. The company offers a range of crypto-oriented financial services, which makes it one of the few viable long-term buys from the crypto industry.
The stock has offered more growth in the last one-and-a-half years than many growth stocks do in a decade—over 500%. While this leans more toward short-term explosive return potential, the long-term potential of the crypto-economy cannot be ignored, and Galaxy is a great way to leverage it.
Foolish takeaway
These five financial stocks don’t just offer reliable long-term growth and dividend potential (except Galaxy for dividends); they are also a diversified group. A few might be bullish, while others are weak in a given market.
