NEW YORK ( TheStreet) -- Goldman Sachs ( GS) and Lazard ( LAZ) are the brokerage stocks to buy, according to Doug Sipkin, a veteran analyst who initiated coverage of the sector at his new employer, Ticonderoga Securities, on Thursday. Starting with six names, Sipkin slapped a "neutral" rating on Morgan Stanley ( MS), Jefferies & Co. ( JEF), Greenhill & Co. ( GHL) and Raymond James Financial ( RJF). Sipkin argues Goldman has been in the "penalty box," because of concerns about tough new regulations and a political backlash, but says he believes the company has a strong capital position and will earn its way out. He expects the bank's fixed income, currencies and commodities division to get a boost from increased volatility in currency and interest-rate trading. On the regulatory and political front, Sipkin says the Obama administration's proposed fee on banks that received TARP money is one of the most significant issues for Goldman. He argues the so-called Volcker rule, while it would be highly damaging, is unlikely to go forward as it has little support in Congress. Also, Sipkin writes that a certain amount of concern over these and other proposals is already reflected in the stock price. Still, his estimates for Goldman to earn $17.99 per share and $17.34 per share in fiscal 2010 and 2011, respectively, are below the current Thomson Reuters consensus estimates of $18.48 and $20.55. Goldman shares hit a post-crisis high of $192.17 in October before falling below the $150 mark in January. They have rebounded lately however, closing Wednesday at $171.94 Sipkin likes Lazard because of improvement in M&A activity, stable revenues from its restructuring advisory business, and a continued strong outlook for asset management after what he calls "breakout" results for 2009. He is also "cautiously optimistic" that the bank will reign in compensation to benefit shareholders. Lazard shares have returned less than 50% in the past year, better than Greenhill, but significantly less than Evercore ( EVR) and less than the S&P 500. Nonetheless, Lazard appears fairly stable following the death of its legendary Chairman and CEO Bruce Wasserstein last year. Its shares are down more than 11% since that date, but that is roughly equivalent to the performance of many of its peers.
Sipkin sees Lazard earning $2.04 per share this year and $3.08 per share in 2011, versus Wall Street's respective average analyst estimates of $2.23 and $2.79 -- Written by Dan Freed in New York.