In this article, we discuss 12 best holding company stocks to invest in. If you want to see more stocks in this selection, check out 5 Best Holding Company Stocks To Invest In.
A holding company is a business entity, usually a corporation or limited liability company, that does not directly manufacture products, offer any services, or carry out any other business operations. Instead, holding companies own controlling stakes in other companies. The main purpose of a holding company is to offer centralized management, and they may also be used for tax or liability purposes. So while it may oversee a subsidiary’s management decisions, a holding company does not actively engage in the daily operations of these subsidiaries.
While a holding company structure can be complicated to navigate, it offers multiple benefits including centralized management and control, limited liability, tax relief, flexibility in terms of investment opportunities and diversifying risk, and branding and reputation management. However, holding companies are subject to additional regulations, limited control over the day-to-day operations of their subsidiary companies, dependence on the performance of subsidiary companies, and problems in raising capital.
Some of the best holding company stocks to invest in include JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Berkshire Hathaway Inc. (NYSE:BRK-A). Investors can also take a look at the biggest holding companies in the world for a well-rounded stock portfolio. (see 15 Biggest Holding Companies in the World)
We selected the following holding company stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged in ascending order of the number of hedge fund holders in each firm.
Number of Hedge Fund Holders: 7
NatWest Group plc (NYSE:NWG) was founded in 1727 and is headquartered in Edinburgh, the United Kingdom. It is a banking and insurance holding company that provides financial products and services to personal, commercial, corporate, and institutional customers in the United Kingdom and internationally. It operates through Retail Banking, Commercial Banking, Private Banking, RBS International, and NatWest Markets segments.
On October 28, NatWest Group plc (NYSE:NWG) reported a third quarter revenue of £3.23 billion, up 20.1% on a year-over-year basis and the GAAP EPS came in at 1.90p for the period. Bank net interest margin of 2.99% was 27 basis points higher than Q2 2022, which was attributed to the impact of base rate increases. In 2023, the company expects to achieve a planned return on tangible equity in the range of 14 to 16%.
JPMorgan analyst Raul Sinha raised the firm’s price target on NatWest Group plc (NYSE:NWG) on December 6 to 310 GBp from 300 GBp and kept a Neutral rating on the shares.
According to Insider Monkey’s data, NatWest Group plc (NYSE:NWG) was part of 7 hedge fund portfolios at the end of September 2022, compared to 10 in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the leading position holder in the company, with 3.34 million shares worth $16.7 million.
Like JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Berkshire Hathaway Inc. (NYSE:BRK-A), NatWest Group plc (NYSE:NWG) is one of the best holding company stocks to consider.
Number of Hedge Fund Holders: 23
Huntington Bancshares Incorporated (NASDAQ:HBAN) was founded in 1866 and is headquartered in Columbus, Ohio. It operates as the bank holding company for The Huntington National Bank, offering commercial, consumer, and mortgage banking services in the United States. The company has four segments – Consumer and Business Banking, Commercial Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group.
Huntington Bancshares Incorporated (NASDAQ:HBAN) paid a $0.155 per share quarterly dividend on January 3, 2023. On November 10, the company increased its medium-term targets for return on tangible common equity to more than 20%. By comparison, Huntington Bancshares Incorporated (NASDAQ:HBAN)’s Q3 ROTCE was 21.9% and adjusted ROTCE was 22.2%. The bank is aiming for pre-provision net revenue growth of 6%-9% for the medium-term and positive operating leverage. It is one of the best holding company stocks to invest in.
On December 5, Morgan Stanley analyst Manan Gosalia upgraded Huntington Bancshares Incorporated (NASDAQ:HBAN) to Overweight from Equal Weight with a price target of $19, up from $16. The analyst prefers mid-cap banks that are best positioned to manage the headwinds from tightening liquidity conditions as rates rise.
According to Insider Monkey’s Q3 data, 23 hedge funds were long Huntington Bancshares Incorporated (NASDAQ:HBAN), with collective stakes worth $168.3 million, compared to 23 funds in the prior quarter worth $71.8 million. Ken Griffin’s Citadel Investment Group is the leading position holder in the company, with 7 million shares worth $92.3 million.
Aristotle Capital made the following comment about Huntington Bancshares Incorporated (NASDAQ:HBAN) in its Q3 2022 investor letter:
“Huntington Bancshares Incorporated (NASDAQ:HBAN), an Ohio-based bank holding company, was removed from the portfolio based on our belief that shares were fully valued and there were better opportunities to deploy capital elsewhere within the portfolio.”
Number of Hedge Fund Holders: 36
MetLife, Inc. (NYSE:MET) is a New York-based holding corporation for the Metropolitan Life Insurance Company, or MetLife, and its affiliates. It is a financial services company that provides insurance, annuities, employee benefits, and asset management services worldwide. It operates through five segments – U.S., Asia, Latin America, Europe, the Middle East and Africa, and MetLife Holdings. On January 10, MetLife, Inc. (NYSE:MET) declared a $0.50 per share quarterly dividend, in line with previous. The dividend is payable on March 14, to shareholders of record on February 7. The company also announced that it will redeem all outstanding $1 billion of 4.368% series D senior debentures on February 10. It is one of the best holding company stocks to invest in.
On January 6, JPMorgan analyst Jimmy Bhullar raised the price target on MetLife, Inc. (NYSE:MET) to $80 from $77 and maintained an Overweight rating on the shares. The analyst’s long-term outlook for the life insurance sector is “downbeat” and he thinks that the near-term risk-reward in stocks is “not enticing.” Life insurance stocks outperformed in 2022 and could perform well if interest rates increase further, the analyst wrote in a research note.
According to Insider Monkey’s data, 36 hedge funds were bullish on MetLife, Inc. (NYSE:MET) at the end of Q3 2022, with combined stakes worth $667.4 million, compared to 36 funds in the prior quarter worth $612.8 million. Richard S. Pzena’s Pzena Investment Management is the biggest stakeholder of the company, with 4.75 million shares worth $288.65 million.
Number of Hedge Fund Holders: 37
United Airlines Holdings, Inc. (NASDAQ:UAL) is headquartered in Chicago, Illinois, and it is the parent company of United Airlines, one of the largest airlines in the world. The company provides air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. Primary positive catalysts for United Airlines Holdings, Inc. (NASDAQ:UAL) in 2023 include the carrier benefiting from international recovery, the new CASMxF trajectory with the pilot contract, and a positive fleet renewal path exiting 2023. It is one of the top holding company stocks to consider.
On January 12, Barclays analyst Brandon Oglenski raised the price target on United Airlines Holdings, Inc. (NASDAQ:UAL) to $45 from $42 and reiterated an Overweight rating on the shares as part of his Q4 preview. Airline stocks are discounting a possible slowdown in demand, but improved leveraging of cost structures through capacity growth and lower than expected jet fuel prices “could be powerful favorable offsets” in 2023, the analyst told investors in a research note.
According to Insider Monkey’s data, United Airlines Holdings, Inc. (NASDAQ:UAL) was part of 37 hedge fund portfolios at the end of Q3 2022, compared to 35 in the prior quarter. Israel Englander’s Millennium Management is a prominent stakeholder of the company, with approximately 4 million shares worth $126.6 million.
Number of Hedge Fund Holders: 44
M&T Bank Corporation (NYSE:MTB) is a New York-based bank holding company that provides commercial and retail banking services. M&T Bank Corporation (NYSE:MTB) operates through Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking, and Retail Banking segments. It is one of the best holding company stocks to monitor.
On January 6, Deutsche Bank analyst Matt O’Connor maintained a Buy rating on M&T Bank Corporation (NYSE:MTB) but lowered the firm’s price target on the shares to $175 from $255. Similarly, on January 3, Wedbush analyst David Chiaverini upgraded M&T Bank Corporation (NYSE:MTB) to Outperform from Neutral on prospects that it could outshine peers from a credit quality standpoint against a recession backdrop.
According to Insider Monkey’s third quarter database, 44 hedge funds were long M&T Bank Corporation (NYSE:MTB), compared to 39 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 1.48 million shares worth $261.8 million.
Number of Hedge Fund Holders: 48
American International Group, Inc. (NYSE:AIG) is one of the best holding company stocks to consider. American International Group, Inc. (NYSE:AIG) offers insurance products for commercial, institutional, and individual customers in North America and internationally. The company specializes in general insurance, health insurance, vehicle insurance, travel insurance, home insurance, life insurance, mortgage loans, investment management, and mutual funds.
On December 14, RBC Capital analyst Mark Dwelle raised the price target on American International Group, Inc. (NYSE:AIG) to $73 from $68 and maintained an Outperform rating on the shares.
According to Insider Monkey’s data, 48 hedge funds were long American International Group, Inc. (NYSE:AIG) at the end of the third quarter of 2022, compared to 44 funds in the prior quarter. Harris Associates is the largest stakeholder of the company, with 22.5 million shares valued at over $1 billion.
Diamond Hill Capital made the following comment about American International Group, Inc. (NYSE:AIG) in its Q3 2022 investor letter:
“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer, media and technology giant Alphabet, and insurance company American International Group, Inc. (NYSE:AIG).
AIG reported strong Q2 earnings, but volatile capital markets led to delays in the IPO of the company’s life and retirement business and concerns about the quality of the company’s investment portfolio. We continue to believe AIG has one of the best management teams in the industry, and they’ve been executing well on turning the business around and improving underwriting and expense control.”
Number of Hedge Fund Holders: 52
Morgan Stanley (NYSE:MS) is a New York-based financial holding company that provides financial products and services to corporations, governments, financial institutions, and individuals, operating through Institutional Securities, Wealth Management, and Investment Management segments. On January 5, Bank of America noted that dividends will see higher importance as investors focus more on total returns in the present investment environment. BofA listed Morgan Stanley (NYSE:MS) as one of the favorite picks for dividend investing.
On January 3, investment advisory Barclays raised the firm’s price target on Morgan Stanley (NYSE:MS) to $125 from $105 and maintained an Overweight rating on the shares. Analyst Jason Goldberg issued the ratings update.
According to Insider Monkey’s third quarter database, 52 hedge funds were long Morgan Stanley (NYSE:MS), with combined stakes worth $3.3 billion, compared to 58 funds in the prior quarter worth $2.9 billion. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 18.4 million shares worth $1.45 billion.
In addition to JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Berkshire Hathaway Inc. (NYSE:BRK-A), Morgan Stanley (NYSE:MS) is one of the top holding company stocks to invest in.
Here is what Madison Dividend Income Fund has to say about Morgan Stanley (NYSE:MS) in its Q3 2022 investor letter:
“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.
Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…” (Click here to see the full text)
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Disclosure: None. 12 Best Holding Company Stocks To Invest In is originally published on Insider Monkey.
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