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This week, in our focus on the winning analysts in each industry category from our

Analyst Rankings -- Equity 2000

survey, we profile the top analysts following diversified financial services. (Our last focus was on

Consumer Finance.) Next week, we'll look at REITs.

Top winner Henry McVey of

Morgan Stanley Dean Witter

and No. 2 analyst Guy Moszkowski of

Salomon Smith Barney

choose investment banks as their top stocks. McVey likes

Lehman Brothers

( LEH), while Moszkowski favors

Merrill Lynch

( MER). Both cite growth opportunities in European investment banking and favorable U.S. demographics as reasons to be bullish on the securities industry as a whole.

The third-ranked analyst in our poll, Steve Galbraith of

Sanford C. Bernstein

, is no longer an analyst, while fourth-place winner Joan Solotar of

TheStreet Recommends

Donaldson Lufkin & Jenrette

was not available for an interview.

Fifth-place Steve Eisman of

CIBC World Markets

also likes Lehman and Merrill, but in early September he advised investors to take profits in these stocks (the stocks peaked around that time, with Merrill climbing about 70% and Lehman rocketing 80% since the beginning of the year). He suggests that investors put those profits into mortgage lenders

Fannie Mae

( FNM) and

Freddie Mac

( FRE), two stocks he feels have great fundamentals as well as being attractively valued, since they had plummeted in the past 18 months on fears that Rep. Richard Baker (R., La.) would succeed in imposing restrictions on them. That political threat dissipated in early September.

In the asset management arena, McVey likes mutual-fund manager

Federated Investors

(FII) - Get Federated Investors, Inc. Class B Report

, a stock Eisman was also endorsing in the first three-quarters of the year.

Moszkowski notes that higher oil prices and a weaker euro could damage financial stocks, which, like most sectors, have been beaten back in the recent market turmoil. He also believes that it will be difficult to maintain the growth rate of the U.S. merger business.

Diversified Financial Services*

* 3rd-place winner Steve Galbraith is now a strategist at Morgan Stanley Dean Witter. 4th-place winner Joan Solotar, of DLJ, was not available for an interview.

Rate Their Stock Picks:

Which stock do you like best?

McVey: Lehman Brothers

Moszkowski: Merrill Lynch

Eisman: Fannie Mae

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