3 stocks to buy as consumer loans rebound


Consumer borrowing is one of the key forces driving the economy, which is why it is so great to see credit card borrowing and car and student loan borrowing increase as our financial system continues to recover. of the impacts of the pandemic. The Federal Reserve recently announced that U.S. consumer borrowing rose $ 35.3 billion in May from the previous month, the biggest jump on record. It is clear that people are increasingly comfortable taking on debt as the job market improves and fears of a pandemic-induced recession are allayed.

From an investment perspective, many companies are well positioned to take advantage of the rebound in consumer loans. It might be a good idea to increase your exposure to these companies as they should see a nice increase in their profits. That’s why we’ve put together the following list of 3 stocks to buy as consumer debt rebounds. Continue reading below to find out more.

Mastercard (NYSE: MA)

It makes sense to watch a company like Mastercard amid a rebound in consumer borrowing, as it is the world’s second-largest payment processor. If the company does not issue cards or extend credit, it should benefit from a recovery in consumer activity thanks to its fee-based business model that generates revenue on gross volume of activity. in dollars on products bearing the Mastercard brand. In the first quarter, the company reported gross dollar volume growth of 8% to $ 1.7 trillion, and it’s easy to imagine a scenario where that number would increase for the remainder of the year.

Also, keep in mind that there are still many ways to develop electronic payment services, as cash is still widely used in many countries around the world. It is estimated that around 85% of transactions are still made with physical currency, a statistic that shows how promising electronic payment networks are evolving. Mastercard also has a great opportunity to capitalize on the growth of e-commerce and mobile payments, and the company’s services such as data analytics, consulting, fraud detection and cybersecurity could also be strong drivers. growth in the future. With so many secular trends in favor of Mastercard, this is clearly one of the best stocks to buy as consumer borrowing continues to rebound.

Capital One Financial Corp (NYSE: COF)

Banks are another place to look if you’re interested in playing the rebound in consumer borrowing, as many of them issue credit cards and generate a lot of income from interest. This includes Capital One Financial Corp, which is one of the largest banks in the United States. The company generated more than 61% of its first quarter revenue from its Credit Cards business segment and offers an attractive way to gain exposure to the consumer loan market. It’s also worth mentioning that auto loans are another big part of Capital One’s business model, which could be another area that will rebound for the rest of the year.

Investors should note that Capital One partnered with big box retailer Walmart in 2019 to launch a long-term credit card program. Capital One is the exclusive issuer of Walmart’s private label and co-branded credit cards in the United States, which could represent a strong growth opportunity for the company going forward. The stock has quietly been one of the top performers on the S&P 500 this year, as Capital One is up more than 62% since the start of the year.

Visa (NYSE: V)

Like Mastercard, Visa is another payment technology company that is expected to benefit from factors such as rising consumer spending, pent-up demand from companies in the service sector, and economic recovery. It is the world’s largest retail electronic payment network and a leading payment brand that helps consumers, businesses and governments with payment solutions. The company’s processing infrastructure called VisaNet processes around 500 million transactions a day, and there are currently over 3.6 billion Visa cards in circulation, which is a staggering number to consider as spending and borrowing resumes.

Another reason to consider adding shares to Visa right now is its leadership position in mobile payments. As smartphones continue to gain popularity in many emerging markets, investors might underestimate how quickly Visa could experience revenue growth over the next several years. The bottom line here is that Visas unmatched scale, huge addressable market, and exposure to consumer spending make this a great stock to consider adding right now.

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