After the May stock market swoon, financial stock Evercore (EVR) took a big tumble. Shares are down over -20% in the last month. However, investors should take notice because this pick could be the value buy of the year. Evercore is a great stock to buy, and I am confident that EVR has big upside for investors.
Let me state for the record up front that I recommended this stock to readers of my investment newsletter at the beginning of the slide, and we’ve lost a decent amount in the past few weeks. But, believe me that, over the longer term, EVR will become a preeminent financial institution.
I have this stock in my portfolio because I believe that this company will fill the void that was created by the implosion of Bear Stearns and Lehman Brothers. Even the big boys like Merrill Lynch may still survive in name but they are really being kept alive by Bank of America more for their wealth management (i.e., brokerage) business. But that’s another story.
Evercore has carved out a role as a player in the very profitable arena of mergers & acquisitions as well as the very robust restructuring/bankruptcy industry. Evercore has recruited talent from across Wall Street. Many bankers were left jobless after Lehman and Bear Stearns failed — plus major house cleaning at many of the firms ultimately made the mistake of throwing out the baby with the bath water.
But wait, here’s more: Evercore was able to appeal to those bankers who wanted to be more aggressive and have the freedoms that come with a growing bank –rather than a TARP bailed-out institutions. This gave Evercore the opportunity to build a stable of some of the best and brightest — many of whom have excellent client connections, which serves to help build Evercore’s business. At the end of 2006, Evercore had only 21 senior advisors; a number that doubled by December 31, 2009.
Let me give you some compelling examples. When Warren Buffet decided to acquire Burlington Northern Santa Fe, this transportation giant hired Evercore to advise on this $26.3 billion dollar transaction. Evercore was the restructuring banker and bankruptcy advisor to General Motors, CIT and MGM Mirage. All of this helped Evercore’s fourth quarter 2009 revenue rise 200% in its merger &acquisitions as well as restructurings groups.
Why did the stock fall? Because mergers & restructure activity came to a screeching halt just like the stock market went belly up at the end of April. Its bad enough that the 1st and 2nd quarters are normally light on M&A usually reaching in the 4th quarter in every year but combine that with the eerily quiet Wall Street. Yes this stock got slammed.
I am a believer that Roger Altman, former Deputy Treasury Secretary and legendary Wall Street deal, maker will turn Evercore into a power house that competes head on with Lazard, Greenhill, Morgan Stanley and even Goldman Sachs. In Addition to Altman, there is also the CEO Ralph Schlosstein, former co-founder and president of the massively huge and successful asset management firm Blackrock. I guarantee you that Schlosstein has ambitious and achievable intentions of taking Evercare’s $5 billion dollars of assets under management and growing them to $500 Billion or more. You think I am being unrealistic? Schlosstein took Blackrock, which was only a concept, and turned it into the money manager of more than $1 trillion dollars (today BlackRock has $3.36 trillion under management). How do you like that?
Now, look at the numbers. Evercore’s market cap is only $462 million. Compare that to Greenhill’s $1.9 billion and Lazard’s $3.0 billion. Yet, they compete head-to-head. So, just imagine the potential for this stock to be more than a double within two to three years.
Like I said, this stock could be the value of the year. I’m sticking with it – and investors with spare cash should consider buying in at current bargain pricing.
Full Disclosure: As stated, Hilary Kramer was recommending shares of EVR in her GameChangers stock newsletter at the time of this writing.
