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In Focus: Brokerages
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December 8, 2000: 1:07 p.m. ET
Brokerage analyst Dean Eberling takes a look at Prudential, others
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NEW YORK (CNNfn) - Dean Eberling, a brokerage analyst with Keefe, Bruyette & Woods, says to expect restructuring to continue in the brokerage sector. He also says to expect "a lot of layoffs."
Eberling does have two stock picks in the sector, however. Read more of his views, and his outlook on brokerage performance, below:
In Focus airs daily on CNNfn's network at 12:10 p.m. The following includes comments made both during the show and in the pre-show interview.
CNNfn: Bear Stearns and Prudential have announced some job cuts. Is this just minor restructuring or is it the tip of the iceberg?
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Interest rates are the biggest factor in the sector as a whole.
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Dean Eberling, brokerage analyst, Keefe, Bruyette & Woods |
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Eberling: I think that we are going through a period where there is the annual culling of the herd, regardless of the economy. There is a natural pruning back and looking for further efficiency. It is also compounded by consolidation, weakening economy, and volatility in the markets. So going into the next year the work force on the street will contract and much of that will come from consolidation.
Prudential is a little different. They are taking a tactical shift, they are looking at an AG Edward's or Paine Webber as a model of choice and will follow those guys in terms of a business model. This will produce a lot of layoffs.
But this is simple restructuring that we see almost every year or so.
CNNfn: Corporate defaults, which have hurt the banking sector, could they spill over into the brokerages?
Eberling: No, they don't carry big positions in syndicated credits. The problems that the Bank of America is having will not spill over into this sector. The psychology in the bond market will hurt these guys.
CNNfn: What are your buy signs for a stock in this sector?
Eberling: We have been very selective. You need to see good valuations and a global reach, and the ability to manage risks and costs well.
CNNfn: Sell signs?
Eberling: If they are not quick to respond to changes and have slow-moving management.
CNNfn: What are your buy signs for the sector as a whole?
Eberling: Interest rates are the biggest factor in the sector as a whole.
CNNfn: What about the IPO market. Has it dried up to the point where it will hurt these stocks considerably?
Eberling: It is embedded. The stocks are down 25 percent in some cases and that is in many ways due to the poor IPO market.
CNNfn: What are your top picks in the sector?
Eberling: Goldman (GS: Research, Estimates), Lehman (LEH: Research, Estimates).
-- Compiled by Tanya Helenius 
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