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Five Financials That Benefit From Reform

Stocks in this article: C BAC EVR JEF HCBK SCHW ICE

NEW YORK ( TheStreet) -- Financial reform is coming, whether the big banks like it or not. This slideshow looks at four individual companies and one sector that could outperform under the revamped regulations.

Jefferies & Co.:

How does getting in on a miniature version of Goldman Sachs (GS) sound? Probably not as good as it did a few weeks ago, but Jefferies & Co. (JEF) is an intriguing option for investors to consider if reform legislation hobbles the likes of Goldman and Morgan Stanley (MS) with size limits as called for by the Volcker rule.

Like those firms, Jefferies combines investment banking advice with trading and research. But the company doesn't draw the same attention from regulators. It is not too big to fail, and it does not rely on implicit government guarantees. That means it is free to ratchet up the risk, and the firm has shown by surviving the crisis that it will not go too far in that regard.

On Tuesday, Jefferies delivered first-quarter earnings of $74 million, or 36 cents a share, up from a year-ago profit of $38 million, or 19 cents a share, and 3 cents ahead of Wall Street's consensus estimate. Revenue jumped 71% year-over-year to $583 million for quarter.

The stock has slumped roughly 10% in the wake of the report, however, a drop that Keefe, Bruyette & Woods attributed to the company reporting revenue from fixed income trading that "paled in comparison to peers" although it was still the biggest contributor to the company's top line.

KBW reiterated an outperform rating on the stock following the report, saying there was a disconnect between the results and the sell-off. The firm's 12-month price target for the shares is $31, implying upside of more than 20% from Thursday's closing price of $25.73.

-- Written by Dan Freed in New York.

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