Citi Analyst Sees Shift in Financial Services Landscape, Comments on Brokers & Asset Managers

October 3, 2008 8:22 AM EDT

Buy Schwab (Nasdaq: SCHW), BlackRock (NYSE: BLK), TD Ameritrade (Nasdaq: AMTD), & Blackstone (NYSE: BX); Sell Fortress (NYSE: FIG) & E*Trade (Nasdaq: ETFC).

Citi analyst says, "The financial landscape continues to change at a rapid pace. We have evaluated all 17 companies within our Brokers & Asset Managers coverage universe to identify the stocks that are both best positioned in the current turbulent market environment and positioned to benefit from a potential market recovery...Expect best core trends at BLK & SCHW. We continue to see BlackRock as extremely well-positioned as it continues to serve as the emergency room during the credit crisis. In our view, Charles Schwab could benefit greatly from disruption at full service brokerages, and its RIA platform could gather over $100b of incremental net new money in the next two years...Expect worst core trends at FIG, GLG, OZM & ETFC. In our view, the recent dislocations in the market led to deteriorating performance across the publiclytraded hedge fund firms. We estimate that 95% of FIG’s hedge fund AUM has negative YTD absolute performance. We also estimate YTD performance of -12% and -7.4% at GLG & OZM. We estimate that ETFC should increase its 3Q08 loan loss provision to $450m as a result of continuing deterioration its mortgage portfolio, and we’re not anticipating a profit for the next 3 years."

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