3 financial stocks that will soon be trading at higher prices

The topic of banking, regulation and bailouts remains a contentious one for Americans. Are big banks a crucial part of our system of capital, or are they inherently corrupt opportunists just out to make a buck? Were the bailouts necessary to ensure stability of our economic system, or just another handout from politicians to their cronies on Wall Street?

So if you’re prepared to be agnostic about the political or philosophical motivations about those firms and focus instead on whether they will make you money, here are three companies in the financial sector that I think are worth buying now:

MetLife

Investing icon Warren Buffett has long been a believer in insurance companies as a core holding of Berkshire Hathaway BRK.B, -0.39% The “float” from premiums paid before any claims are paid out provide stability as well as access to reliable dividends.

And if interest rates do start to move higher in late 2015 and into 2016, the interest earned on this float will improve nicely.

For this reason alone, insurance companies should have a place in every long-term portfolio. But MetLife Inc. MET, -0.51% in specific, has a lot to offer right now.

Discover Financial Services

Diversified lending: A major driver of growth lately has been Discover’s lending business beyond credit cards, including student loans and home loans. Consider personal loans hit $4.8 billion in the third quarter, up over 20% from just under $4 billion a year ago.

Loyal customers: A big reason Discover has been successful in its efforts to branch out into new products is because of its strong customer satisfaction

Dividend growth: Discover is paying out 24 cents a quarter. That’s up 20% from 20 cents quarterly at the beginning of last year, and up 12-fold from just 2 cents quarterly at the end of 2010. What’s more, the payouts are only 18% of projected fiscal 2014 profits. That means the yield of 1.6% is bound to march significantly higher in the years ahead.

With a combination of great earnings growth and great dividend growth, Discover is a smart long-term buy for investors willing to ride out any short-term volatility in the months ahead.

J.P. Morgan Chase

Remember, major banks like J.P. Morgan are cyclical investments, and the U.S. economy continues to chug higher with a steadily improving job market. Even if the market as a whole sees volatility, companies like J.P. Morgan that have a tight link to commercial and consumer lending will continue to do well regardless of what investors’ short-term moods are.

Just as Buffett invests in insurance stocks for the cash flow, he also believes in buying good businesses at a fair price when the market is overly negative.

That seems to be the case with J.P. Morgan after a double-digit decline in just a few weeks.