Three finance stocks to buy now

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Nick Brind, manager of the HIM Income Fund.
Our research shows that the financial sector's risks have been overblown. And there are still plenty of attractive investment opportunities left despite the sharp recovery in share prices over the last six months.

In the non-life insurance sector, for example, Sampo (FH: SAMAS), a Finnish company with a market capitalisation of €9.5 billion, offers an extremely attractive play on the Nordic financial sector. Sampo owns If, one of the largest property and casualty insurance companies in the Nordic region, and Mandatum Life, a life insurance company operating in Finland and the Baltics. It also boasts a dividend yield of 4.7%.

The chairman, Bjorn Wahlroos, has a stake of more than 2% in the company, which very much aligns his interests with external shareholders. Indeed, under him the company has created significant value. For example, in May 2007 it sold Sampo Bank, the third largest bank in Finland, to Danske Bank (Denmark's largest bank) for €4.1 billion. That price was equivalent to an extraordinary 3.7 times book value or 16 times earnings. This cash has since been reinvested over the last year with around one half of it sunk into buying close to a 20% stake in Nordea, the Nordic region's largest bank, for less than 1.5 times book value.

Within the banking sector there are big opportunities for strong banks to capitalise on the woes of their weaker competitors, many of whom have had to rely on state funding to survive, or are no longer in business. DnB NOR (NO: DNBNOR) is one such predator. It is Norway's largest bank with a market capitalisation of NOK86bn. It remained profitable in 2009 despite fears that its exposure to shipping loans would result in significant asset write-downs.

The wider Norwegian economy has proved extremely resilient over the last two years, and with its oil wealth, remains the envy of many countries. Indeed, Norway is expected to raise interest rates over the coming months, which will help DnB NOR. This, and the collapse in competition, will result in a widening of net interest margins. Trading on a small premium to tangible book value, but a big discount to many of its European peers, it remains a solid investment.

At the riskier end of the spectrum, International Personal Finance (LSE: IPF) – market capitalisation £440m – is a home-collection lender operating in central and eastern Europe and Mexico, but listed in the UK. It demerged from Provident Financial in 2007, a similar firm that has never made a loss in its 120-year history. The idea was that it would trade on a high-teens price/earnings ratio reflecting its greater growth prospects in emerging consumer-finance markets.

Its key strength is that it borrows long term to lend short term (the exact opposite of a bank). It also only lends small amounts of money to individuals. Despite this, its shares fell sharply at the end of last year, and during the early part of this year, over concerns about its exposure to eastern Europe. The shares have partly recovered, but still only trade on a forecast 1.3 times book value and eight times earnings for 2010. Some of its peers trade on as much as four times book value, which highlights the potential upside for the share price.

The stocks Nick Brind likes

	12-month high	12-month low	Now
Sampo	€17.72	€8.63	€17.57
DnB NOR	NOK74.00	NOK14.90	NOK70.70
International Personal Finance	225p	58p	2