Follow the Money: 3 Stocks That Will Benefit from Wall Street’s Boom

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The Wall Street Journal reported on July 16 that investment banking revenues at many Wall Street banks rose by double-digit percentage points in the latest quarter. As a result of the increased economic stability in the U.S., corporate clients of the firms were using more of the banking services, including transaction advisory and debt offerings. In addition, revenues at many asset and wealth management firms rose in the second quarter. I believe that these recent increases were largely due to the increase in business that these institutions experienced.

Specifically, Wall Street firms’ success in trading has encouraged higher-net-worth clients to invest more in the wealth management units of these firms. Meanwhile, with the stock market rallying and interest rates expected to continue to fall, the number of initial public offerings and mergers and acquisitions is likely to increase significantly in the second half of the year, which will benefit many Wall Street firms. Here are three stocks with trading volume to buy to take advantage of these strong trends.

JPMorgan (JPM)

JPMorgan (NYSE:JPM) already appears to be benefiting significantly from the improvements in its trading, corporate banking and wealth management businesses that I described in the introduction to this column. That’s because the firm’s investment banking fees are up 50% from the same period a year earlier, while its overall market revenue is up 10% year over year. As a result, I consider this to be one of the best volume stocks to buy.

In addition, CFO Jeremy Barnum indicated that he expects the bank’s investment banking revenue to continue to grow in the future. He said, “The dialogue around (equity capital markets) is elevated, and the dialogue around M&A is also pretty solid — so all of those things are good, which encourages us and gives us hope that we might see some better momentum in that area.”

JPM shares are changing hands at a low price-to-earnings ratio of 12.5, while the stock has a hefty dividend yield of 2.2% after the bank increased its dividend payout by 19% this year.

Nasdaq (NDAQ)

Nasdaq (NASDAQ:NDAQ) generates revenue primarily by selling trading technology products and charging companies a listing fee. These companies should benefit significantly from a stock market rebound in the second half of the year. Specifically, demand for Nasdaq trading technology products should increase as institutional revenues and activity increase. Meanwhile, the stock market rebound and increased optimism about stocks should lead to more IPOs and equity offerings, which would boost the company’s stock market performance.

That momentum may already be underway, as the company reported strong second-quarter results on July 15. Specifically, its top line was up 10% compared to the same period a year earlier. Additionally, its operating income, excluding certain items, rose 28% year over year to $620 million.

Equally encouraging, CEO Adena Friedman said during the company’s second-quarter earnings conference call on July 25 that “we continue to see continued robust trading activity across markets, as well as strong demand for mission-critical technology solutions from financial institutions around the world.”

The shares have an attractive price-to-earnings ratio of 23.3.

KRR (KKR)

KKR (NYSE:KKR) is a private equity firm that specializes in investing in companies and then selling them at higher prices. The firm should benefit greatly from falling interest rates, which will encourage more companies to pursue mergers and acquisitions. Additionally, as investors become more interested in buying mid- and small-cap stocks, KKR should be able to profitably acquire more of the companies it owns on the stock exchange.

Citi issued a positive note on KKR shares last month, indicating that the company’s results were improving. The bank expects KKR investor money to rise to $33 billion in the second quarter, up from $31 billion in the previous quarter. In addition, Citi believes KKR was also able to sell more of its assets in the last quarter compared to Question 1.

Analysts forecast KKR’s earnings per share rose to $1.09 in the latest quarter, compared with 97 cents in the first quarter and 81 cents in the second quarter of 2023.

As of the date of publication, Larry Ramer did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are the author’s own, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication of this article, the editor in charge did not hold (directly or indirectly) any interests in the securities referred to in this article.

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