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3 financial stocks that are odds-on winners

Investors have a tendency to shy away from IOOF Holdings Limited (ASX: IFL), FlexiGroup Limited (ASX: FXL) and Yellow Brick Road Holdings Ltd (ASX: YBR) because, as financial companies, they lack physical assets and can be difficult to understand.

It is completely understandable that this would put investors off, but there are several simple, well operated ASX listed companies which offer very attractive buying opportunities.

Superannuation provider IOOF is a good example. The company has four divisions, but arguably the two most important are giving financial advice and managing funds. The funds business will likely fluctuate along with share market performance over time, but both divisions should see organic growth in years to come as a growing number of people seek advice and help to plan their transition to retirement.

IOOF grew revenue by 11% in the first half of FY14, while underlying NPAT was up 14% and the company is optimistic about attractive trading conditions going forward. Paying a dividend yield of 5% sweetens the deal.

FlexiGroup Limited is another company made up of several different business groups, but can be tied together under the heading ‘consumer finance’. The company offers financial products including credit cards, interest free finance and leasing for which it charges fees.

Trading at a moderate 16 times earnings, FlexiGroup expects to add vale for investors through organic growth as well as reportedly investigating a number of acquisition opportunities.

Then there is rapidly growing wealth management company Yellow Brick Road. The company has branches all over Australia and provide services to first home buyers and experienced investors. It’s an easy enough business to understand and is rapidly growing new branches as well as looking at acquisition opportunities, similar to FlexiGroup.

All three companies are relatively easy to understand when broken down into their parts, and at current prices are worthy of a place on all investors’ watchlists.

5 stocks under $5

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*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Regan Pearson owns shares in Flexi Group Limited.

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