NEW YORK (TheStreet) -- The past few years have been good for investment banks. After the Great Recession, investment banking firms raised more capital, refocused efforts on traditional advising and underwriting activities, and some diversified into wealth management. There has been much IPO activity and merger and acquisition deals over the past few years; as they continue to pick up the pace, revenues and headcounts in the industry will solidify and increase.
With financial assets in the trillions (Banking assets $14.45 trillion and Pension assets $18.9 trillion), rising financial wealth due to rising stock prices, and a growing economy, the brokerage companies have a bright future.
So, what are the best investment banks and brokerage companies investors should be buying? Here are the top five, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which investment banks and brokerage companies made the list. And when you're done be sure to read about which online retail and e-commerce companies to buy now. Year-to-date returns are based on May 12, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.RJF data by YCharts
5. Raymond James Financial, Inc. (RJF)
Market Cap: $7.9 billion
Year-to-date return: .42%
Raymond James Financial, Inc., a financial holding company, through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, as well as the sale of mutual funds and other investment products in the United States, Canada, and Europe.
"We rate RAYMOND JAMES FINANCIAL CORP (RJF) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share and increase in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RJF's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- RAYMOND JAMES FINANCIAL CORP has improved earnings per share by 6.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RAYMOND JAMES FINANCIAL CORP increased its bottom line by earning $3.32 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($3.55 versus $3.32).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 8.5% when compared to the same quarter one year prior, going from $104.56 million to $113.46 million.
- You can view the full analysis from the report here: RJF Ratings Report