How to Play the Investment Banking Renaissance
Gary Dorsh recently wrote: Global equities have been bouyed by $1.1 trillion in takeovers in the US, followed by Europe with $999 billion, and trailed by Asia with $312 billion in 2005. Mergers and acquisitions, are injecting fresh cash into global markets, as corporations use record cash flows for the biggest spending spree since the Internet bubble burst.If that's the case, we all better load the boat with shares of Factset (FDS), a research services company that caters to Wall Street's information-obsessed bankers, analysts, and portfolio managers.
As more deals come through the pipe in 2006, more information has to be processed, chewed, and spit back out to the masses.
That's where Factset comes in. It's service mix has already helped millions of US financial professionals synthesize the myriad events that transpire on Wall Street everyday.
Our thesis on Factset boils down to one theme, really: expansion potential, namely in 2 areas.
The company has considerable potential to grow its overseas business, as well as rip the cover off the ball, if it wanted to, in the lucrative-but-grossly underrated fixed income space.
All we hear about in the media -- and especially on this site -- are stocks. But one should never forget bonds, the old gentleman's investment vehicle of choice.
Bond flow on the Street is pervasive -- heck, it's what keeps the well-oiled Lehman Brothers (LEH) machine running and snapping its competitors in half like a dry winter twig.
We believe that the demand for information services like those provided by FactSet will remain robust.
Although it has its fair number of competitors, we're looking at a high-potential market that Factset has thus far excelled in.
If Factset meets our criteria, there's nowhere for the company's multiple to go but up. We're initiating coverage with a strong buy rating.
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