Barclays picks OneMain, AmEx, others as Overweight stocks in a Neutral sector (NYSE:OMF)

Barclays takes a neutral view of the U.S. consumer finance sector and initiates coverage of 22 stocks, including consumer lenders, mortgage finance companies and aircraft lessors, all of which are influenced to varying degrees by the economic and interest rate cycles.

“We take a selective stance and balance the uncertainty around the macro and rate outlook with discounted valuations,” analyst Terry Ma wrote in a note to clients.

On the lending side, the Barclays analysts look for attractive total return potential or growth characteristics that can persist through the cycle. For the mortgage sector, they favor balanced business models or stocks that have credit tailwinds.

“We also like the aircraft lessors and believe they benefit from a combination of cyclical and secular tailwinds along with cheap valuations,” Ma said.

In assigning Overweight ratings, Ma and colleagues like OneMain (NYSE:OMF) for its total return potential, American Express (NYSE:AXP) and SLM (NASDAQ:SLM) for growth through the cycle, PennyMac Financial (NYSE:PFSI) and Mr. Cooper Group (NASDAQ:COOP) for balanced mortgage business models, and Essent Group (NYSE:ESNT) and NMI Holdings (NASDAQ:NMIH) for credit tailwinds combined with cheap valuations. Both aircraft lessor companies in the sector, AerCap Holdings (NYSE:AER) and Air Lease (NYSE:AL), also get Overweight ratings.

Underweight stocks include: Bread Financial (NYSE:BFH), Rocket Companies (NYSE:RKT), and UWM Holdings (NYSE:UWMC). While Barclays considers Rocket (RKT) and UWM Holdings (UWMC) to be long-term winners in the mortgage space, “they are most levered originations with less substantial servicing hedges.”

The Equalweight cohort is: AGNC Investment (NASDAQ:AGNC), BrightSpire Capital (NYSE:BRSP), Discover Financial Services (NYSE:DFS), Fidelity National Financial (NYSE:FNF), First American Financial (NYSE:FAF), MGIC Investment (NYSE:MTG), Navient (NASDAQ:NAVI), Radian Group (NYSE:RDN), SoFi Technologies (NASDAQ:SOFI), and Synchrony Financial (NYSE:SYF).