Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS): Investment Banking Winners & Losers in Early 2013

Published on March 1, 2013 at 1:45 pm by The Motley Fool in Stock Analysis

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I do think we find better values in second tier investment banks. One I like a lot right now is Piper Jaffray (NYSE:PJC) . This company offers investment banking services, but on a smaller scale than its larger peers. It had a rough 2011, so its 2012 earnings of $41.3 million, or $2.26 per share represented a nearly threefold increase from 2011. I am confident there is plenty more growth in store. The company will benefit from jettisoning its money losing Hong Kong division, and is positioning for growth in the eastern United States, outside of its traditional western footprint. The company is forecast to have nearly 20% profit growth over the next five years, driving its PEG down to 1.0. While the stock price is up 80% in the past year, there is plenty more growth available and I see this as a winner in the investment banking sector for the next 12 to 18 months.

Finally I wanted to take a look at Raymond James (NYSE:RJF) , which spent much of 2012 digesting the purchase of Morgan Keegan from Regions Financial (RF). In its first quarter of its fiscal 2013, which ended December 31, 2013, revenues of $1.11 billion were up 41% from the first fiscal quarter of 2012, and profits came to $86 million, or $0.61 per share. The per share amount was up 15% from the year ago quarter. I expect as Raymond James gets costs from the Morgan Keegan addition under control that its margins will spread, and, barring a stock market collapse, expect earnings up roughly 30% from 2012, to about $3.00 per share. All of this would be terrific news, if the stock had not already climbed 28%, which while considerable, is less than other stocks covered in this article. That, along with a reasonable PEG of 1.04, makes Raymond James an attractive long term holding.

The article Investment Banking Winners & Losers in Early 2013 originally appeared on Fool.com.