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
( LEH), while Moszkowski favors
( 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
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
( FNM) and
( 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
, 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