Here’s a question I’ll bet you haven’t been asked recently: What do Intel (NASDAQ: INTC), Berkshire Hathaway (NYSE: BRK.A), BusinessWeek and General Motors all have in common?
Why should you care? Because I believe the answer will make you money in 2011.
I’ll admit that when InvestorPlace.com asked me to pick one stock to for the new year, my first inclination was to go after huge gains. Hey, it’s only one stock, right? So you want to shoot for the moon. Problem is, high fliers also have a higher likelihood of crashing.
On the other hand, I didn’t want to recommend a CD-like, low-risk, high-percentage trade that would hold its value but not make you a heckuvalot of money.
I decided to go with the best of both worlds: a stock that is very likely to move higher in 2011 and generate profits big enough – and exciting enough! – to make a real difference for you.
The stock that I believe best meets those criteria is Evercore Partners (NYSE: EVR).
If you’ve never heard of it, you’re not alone. Evercore is an emerging powerhouse on Wall Street that specializes in three of the highest- margin businesses in the entire corporate spectrum: mergers & acquisitions (M&A), restructuring (bankruptcy work) and asset management. I expect the big driver in 2011 to be its work in M&A.
EVR Mergers and Acquisition Biz on the Move
Legendary CEO Ralph Schlosstein is one of the greatest dealmakers in the history of Wall Street. He has made Evercore the go-to player for advising companies on large deals, and the M&A market is red hot.
There was certainly a lot of activity in 2010, and Evercore grew this part of its business eightfold in the past year, but I expect it to outright explode next year.
Why? It’s pretty simple, really. For the past several years, companies hunkered down to survive the financial crisis and recession. Confidence is clearly returning, but economic growth remains sluggish with unemployment so high. That makes it tougher to grow a business organically, so more and more companies are looking to buy growth. And with corporations sitting on record levels of cash, the money is there to do it.
A recent study from Thomson Reuters and Freeman Consulting Services concluded that the global market for M&A will surge 36% in 2011 to over $3 trillion. Evercore is the real game changer here and should be one of the biggest beneficiaries of all that deal making.
As Ralph Schlosstein recently said: “A new wave of corporate takeovers is building. We tend to have five- to seven-year up cycles; we are in the first year.”
More Growth Strategies
In addition to the exploding M&A work, the company has growth strategies in place for all of its divisions:
- Increasing the team: EVR is growing its revenue-producing banking team to by expanding their restructuring practice. They expect 53 senior managing directors by 2011, double the 2007 number.
- Geographic expansion: I expect cross-border M&A to be especially strong in 2011. That will be more opportunities to better support new and existing clients. Early in the fourth quarter, Evercore completed its 50% acquisition of Brazil investment banking boutique G5 advisors, increasing the company’s reach into one of the world’s largest economies. Evercore has also partnered with Protego seeking investment opportunities in Mexico. To bolster their European presence, they acquired London-based Braveheart Financial Services. And in the important Pacific Rim sector, Evercore’s formed an alliance with Mizuho Securities to help support their work in U.S.-Japan cross-border M&A and restructuring transactions and with CITIC in China.
- Assets under management: To grow its assets under management and diversify into new investment management services, Evercore recently launched a wealth management business for high net worth individuals and related institutions, added an experienced U.S. equity investment team and launched Evercore Trust Company via an acquisition.
A Year of Big Growth for Evercore
If you haven’t guessed by now, Evercore is the answer to the question we started with. All of those companies have been involved with deals or transactions on which Evercore advised, and the pace will only pick up in 2011.
That’s why you want to own EVR now. Earnings are expected to grow 77% in 2011, which makes the stock attractively valued right now. Its current P/E (for the last 12 months) is nearly 100X, which looks scary, doesn’t it? But based on expected earnings in 2011, the P/E drops dramatically to only 19X.
I’ve told my GameChangers members to buy EVR anytime they can get it under $33.50. I’d be shocked if the stock doesn’t move to at least $40 in 2011, but in truth, I think there’s a good chance it goes higher. I look forward to following it with you.
Check out the other FREE stock picks that make up InvestorPlace.com’s Top 10 Stocks for 2011.
As of this writing, Hilary Kramer was recommending Evercore to her paid newsletter subscribers.
