Boutique is the new bulge: Broadpoint Gleacher Securities Group
blends a boutique investment bank with a securities trading firm. The company formed earlier this year when Broadpoint bought Gleacher Partners, an advisory firm founded by mergers-and-acquisitions legend Eric Gleacher in 1990. The new entity generated a huge quarterly profit.
Second-quarter revenue surged 178% to $92.7 million, helped by demand for debt trading and restructuring advice. Broadpoint is expanding its presence in sales and trading, capitalizing on the void left by
Its quarterly operating margin climbed from 5% to 24% and the net margin rose from negative territory to 16%. Broadpoint has a conservative capital structure relative to peers, with a debt-to-equity ratio of 0.2. In contrast, JPMorgan, Goldman Sachs and
(MS - Get Report)
all have debt-to-equity ratios over 1.
Broadpoint's Descap group is now one of Wall Street's largest players in mortgage-backed securities, collateralized loan obligations and collateralized debt obligations. These so-called toxic assets have become a public relations nightmare for banks mired in the Troubled Asset Relief Program, allowing Broadpoint to scoop up business.
Second-quarter Descap revenue more than tripled to $38 million. Revenue from its debt capital markets unit climbed 159% to $36 million. Broadpoint's expanded slate of services should help the company grow, boosting its shares.
Even though Broadpoint's shares aren't cheap at a price-to-earnings ratio of 25, it's the best bet among boutique investment banks. Small-cap competitors like
offer inferior investments.
Trading opportunities: Knight Capital Group
specializes in trading over-the-counter securities and pink sheets. Its focus on low-priced stocks puts it in a potentially profitable position. As institutional money comes off the sidelines, investors will target stocks they consider cheap. Over-the-counter stocks, or OTCs, have limited research coverage, which will help them attract capital.