Splitting the Goldman Sachs Difference

The observation has Bove toying in a recent research note with the notion of a Goldman breakup.

Bove points out that Goldman trades at 10.4 times its projected fiscal 2007 earnings. Meanwhile, high-profile boutiques such as Lazard (LAZ Quote) and Greenhill (GHL Quote) sell at multiples twice that of Goldman.

From a private equity/hedge fund standpoint, Fortress Investment Group (FIG Quote), which was the first hedge fund to go public, trades at a whopping 29 times earnings.

And plain vanilla retail brokers such as A.G. Edwards (AGE Quote) and Jeffries (JEF Quote) trade at 17 times and 20 times earnings estimates, respectively.

Bove notes that Lazard, A.G. Edwards and other so-called monoline shops by definition have much more targeted, product-specific lines of businesses than supermarkets like Goldman. So they trade at much higher multiples.

"If Goldman were to break out its earnings along product lines so that they could be compared to these other firms, I have no doubt that one could plot a break-up value for this company that would be 100% above its current price," Bove's report says.

Given Wall Street's investment appetite and its interest in planned initial public offering such as Blackstone's, a hypothetical split-up of Goldman's operations could cause a feeding frenzy.

But as Citigroup's embattled chief Chuck Prince and his predecessor Sandy Weill surely must appreciate, being diversified has its own strong merits. Bove underscores that diversity and steady income generation are big attractions at one-stop shops such as Citi and Goldman.