Editor's Note: Please note that our Financials analyst Jonathan Casteleyn will send out a full report outlining our high-conviction short thesis later this week. In the meantime, below is a brief summary of our thesis sent yesterday by Hedgeye CEO Keith McCullough in Real-Time Alerts.
Looking for great ways to play the end of the levered investing cycle? Look no further than bankers at Lazard (LAZ). Per Jonathan Casteleyn's most recent research note:
"Like most cyclical stocks, Lazard "looks" cheapest at market tops as its earning downturn is just getting started versus at market bottoms when the company is underearning and shares "look" expensive (but they are actually great early cycle longs).
We have earnings flat at $2.80 for 2016 and 2017 which we capitalize at 8-9x for a fair value of $25. However in a 1 Emerging Market type downcycle, Lazard asset management with ~50% of its asset-under-managments in EM credit and equity will cause LAZ stock to overcorrect and spit off more downside (substituting current day China for Thailand in '97 in running out of FX reserves to support its currency and plugging in Venezuela or the Ukranine for Russia's '98 default)."