This week, in our focus on the winning analysts in each industry category from our
Analyst Rankings -- Equity 2000
, we profile the top analysts tracking consumer finance. (Our last focus was on
banks.) Next week, we'll look at diversified financial services.
Our top three analysts have a range of outlooks for the consumer finance sector, which has outperformed the
S&P 500 by 49 percentage points since the beginning of the year.
Our top-ranked analyst,
Gary Gordon, believes that current economic conditions will benefit mortgage companies but hurt credit card companies. Expecting the economy to grow at a slower 3% rate for the remainder of the year, he thinks the credit card industry will experience a slowdown. The mortgage industry, on the other hand, will profit from stabilizing interest rates and from homebuyers returning to fixed-rate from adjustable-rate mortgages. He selects
( FRE) as his top pick.
Steven Eisman of
CIBC World Markets
believes that credit card companies will do well near term, but he is less sanguine about the long-term picture. Noting the close connection between the credit card and mortgage industries, our No. 2 analyst argues that the recent end of the mortgage refinancing boom will ultimately lead to a decline in the quality of credit card debt. He likes
( PVN) as the cheapest play.
Donaldson Lufkin & Jenrette's
Moshe Orenbuch has the most positive outlook, arguing that credit card companies and consumer lenders alike are benefiting from stabilizing interest rates. Most of these companies are also seeing stable credit quality and improving margins, he says. Orenbuch names
as his top pick. Both Orenbuch and Eisman like home equity lender
, which is benefiting from stable housing prices.
Rate Their Stock Picks:
Which stock do you like best?
Gordon: Freddie Mac
Orenbuch: Capital One