The increasing demand for varied investment opportunities and the integration of technological advancements have positioned the investment brokerage industry for significant growth this year and beyond.
Therefore, it could be wise to invest in quality brokerage stocks Stifel Financial Corp. (SF), BGC Partners, Inc. (BGCP), and Oppenheimer Holdings Inc. (OPY). Let’s understand this in detail.
Investment brokerage firms cater to retail investors, traders, and independent registered investment advisors. They provide a range of securities brokerage services and technology-driven financial solutions. Additionally, they extend their expertise to advisory services and assist in facilitating corporate mergers and other business transactions.
The securities brokerage industry in the United States consists of around 23,000 establishments, encompassing both single-location companies and units of multi-location companies, with a combined annual revenue of roughly $126 billion. According to a report by Mordor Intelligence, the U.S. securities brokerage market is expected to grow at a 6% CAGR by 2028.
Investors are actively seeking avenues to enhance their capital, resulting in an increase in available investment options and subsequent expansion in the brokerage industry. The global security brokerage and stock exchange services market is projected to reach $690.60 billion, growing at a CAGR of 8.9%.
In addition, a significant boost from technological advancements is propelling the industry’s growth. Brokers are actively investing in digitization, machine learning, and robotics, leveraging the power of the cloud to achieve faster updates and wider accessibility.
These platforms enable investors to tailor their portfolios based on risk tolerance and goals. Real-time tracking, easy access, and the ability to make investment adjustments via mobile or web apps further enhance their appeal.
The S&P 500 Investment Banking & Brokerage Index’s 8.8% return over the past month highlights investors’ keen interest in brokerage stocks.
Given the industry’s promising growth prospects, investing in fundamentally strong brokerage stocks SF, BGCP, and OPY seems wise now.
Let’s delve deeper into the fundamentals of the featured stocks.
Stifel Financial Corp. (SF)
SF is a financial services and bank holding company. It provides wealth management and investment banking services. The company also offers underwriting for corporate and public finance, financial advisory services, and securities brokerage services. Its segments include Global Wealth Management; Institutional Group; and Other.
On March 1, SF completed the acquisition of Torreya Partners LLC, consolidating its standing as a premier global healthcare franchise. The merged entity, the Stifel Global Healthcare Group, would feature investment banking experts catering to clients worldwide in a sector requiring cross-border prowess and global influence.
With profound expertise in life sciences, encompassing biotechnology and pharmaceuticals, Torreya is expected to strengthen SF’s platform through substantial advisory proficiency in divestitures and joint ventures, royalty monetization, licensing agreements, and private capital raising.
On February 16, SF launched an Agency Structured Products Group to expand its presence in agency commercial mortgage-backed securities. The group will purchase and securitize Ginnie Mae project loans and underwrite loans for government-sponsored enterprises and the U.S. Small Business Administration.
This initiative is expected to enhance SF’s fixed-income origination products and services.
SF’s total revenues for the first quarter (ended March 31, 2023) increased 12.1% year-over-year to $1.26 billion. Its comprehensive income grew 72.9% from the year-ago value to $183.68 million.
Its cash inflows from financing activities rose 4.5% year-over-year to $1.23 billion. As of March 31, 2023, the company’s cash and cash equivalents were $2.77 billion, compared to $2.20 billion as of December 31, 2022.
Analysts expect SF’s revenue for the fiscal year (ending December 2023) to increase 4.7% year-over-year to $4.60 billion. The consensus EPS estimate of $6.55 for the ongoing year reflects a 14% growth year-over-year. Shares of SF have gained 3.1% over the past month to close the last trading session at $59.36.
SF’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SF has a B grade for Momentum. It is ranked #2 in the 21-stock Investment Brokerage industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SF’s ratings for Growth, Quality, Value, Stability, and Sentiment here.
BGC Partners, Inc. (BGCP)
BGCP is a financial brokerage and technology company. It provides brokerage products in fixed income, interest rate derivatives, energy and commodities, shipping, insurance, futures, and options. Its clients include banks, broker-dealers, investment banks, trading firms, hedge funds, governments, corporations, and investment firms.
On May 17, Fenics GO, a global platform for financial information and trading facilitated by BGCP’s Fenics division, announced the addition of 37 HKEX MSCI derivatives products to its platform.
The alliance is expected to broaden Fenics GO’s product portfolio while affirming its commitment to enhancing block trade arrangements for the broader market in a more efficient, compliant, and cost-effective manner.
For the first quarter that ended March 31, 2023, BGCP’s revenues increased 5.2% year-over-year to $532.87 million. Its post-tax adjusted earnings grew 12.1% from the year-ago value to $115.62 million, while its post-tax adjusted EPS increased 9.5% year-over-year to $0.23.
In addition, the company’s adjusted EBITDA rose 7% from the prior year’s quarter to $151.11 million.
The consensus revenue estimate of $1.97 billion for the fiscal year ending December 2023 reflects a 9.6% year-over-year improvement. Likewise, the consensus EPS estimate of $0.82 for the current year indicates an 18.8% rise year-over-year. Moreover, the company topped the consensus EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 50.6% over the past year to close the last trading session at $4.70.
BGCP’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
BGCP has a B grade for Growth, Quality, and Momentum. It is ranked #3 out of 21 stocks within the same industry.
Click here to access additional BGCP ratings (Value, Stability, and Sentiment).
Oppenheimer Holdings Inc. (OPY)
OPY is a middle-market investment bank and full-service broker-dealer. It offers brokerage services for corporate equity and debt securities, money market instruments, options and futures contracts, municipal bonds, and mutual funds. The company also provides asset management and investment banking services.
On March 21, OPY’s subsidiary, Oppenheimer & Co. Inc., a prominent wealth manager and investment bank, inaugurated its Miami Coral Gables office. The expansion capitalizes on the region's burgeoning status as a vital financial services hub, enabling the company to cater to an extended domestic and international clientele.
Also, on March 16, OPY announced the successful conclusion of a Series C funding round for Perspectum, a United Kingdom-based medical imaging, and diagnostic technology provider.
OPY spearheaded the $55 million round, contributing $27 million via its Private Market Opportunities (PMO) initiative, a collaborative effort involving the firm’s Investment Banking, Asset Management, and Private Client Division business units.
The PMO initiative empowers esteemed institutional investors and qualified private clients of OPY to invest in burgeoning private companies.
OPY’s revenue increased 20.9% year-over-year to $321.68 million for the first quarter that ended March 31, 2023. Net income and EPS attributable to OPY grew 57.3% and 76.8% from the prior year’s period to $14.62 million and $1.22, respectively.
Also, as of March 31, 2023, the company’s total assets stood at $2.92 billion, compared to $2.71 billion as of December 31, 2022.
Analysts expect OPY’s EPS to grow 15% per annum over the next five years. Shares of OPY have gained 6.1% over the past month and 16.7% over the past year to close the last trading session at $39.42.
OPY’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
OPY has a B grade for Value, Growth, Momentum, and Quality. It has topped the 21-stock Investment Brokerage industry.
Click here to access additional OPY ratings for Stability and Sentiment.
What To Do Next?
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SF shares were trading at $60.27 per share on Wednesday afternoon, up $0.91 (+1.53%). Year-to-date, SF has gained 4.47%, versus a 14.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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