Magazine article American Banker

Shares of Brokerage Firms Seen Poised for a Surge

Magazine article American Banker

Shares of Brokerage Firms Seen Poised for a Surge

Article excerpt

Move over, retail banking stocks; it's time for the brokerages to shine.

Analysts say that after three tough years, conditions are improving for many of the sector's core businesses, including equity underwriting, mergers and acquisitions, initial public offerings, and leveraged buyouts. As a result, many observers are growing bullish on the sector.

"The bottom line is that industry fundamentals look good across the board and brokerage stocks are poised to benefit," Brad Hintz, an analyst with Alliance Capital Management LP's Sanford C. Bernstein & Co., wrote in a report Thursday. "We believe it would be unwise to bet against the group's 2004 growth prospects."

Mr. Hintz has "buy" ratings on Goldman Sachs Group Inc. and Morgan Stanley, both of which reported solid fiscal fourth-quarter earnings last month. Morgan Stanley said profits for the quarter than ended Nov. 30 rose 42% from a year earlier, to $1 billion. Goldman said its profits almost doubled, to $971 million.

Jeffery Harte, an analyst with Sandler O'Neill & Partners LP, maintains a "buy" rating on the entire sector and says he has been bullish on it "since last fall." The stocks have had a good run over the last six months, but that run is "hardly" over, he said.

Morgan Stanley's share price, which bounced around the $40 mark last spring, has jumped 46% since then. In the same period Merrill Lynch & Co. Inc.'s stock has soared 68%, Goldman is up 44%, Lehman Brothers 38%, and Bear Stearns Cos. …

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