The Hedgeye Financials team will be hosting a black book conference call to add Lazard (LAZ) to their Best Ideas list as a short on February 14 at 11AM ET. The presentation will outline the still unrecognized risks and complacency in this highly cyclical company.
KEY DISCUSSION POINTS:
- M&A Set to Comp Lower: After a new high water mark in global mergers and acquisitions in 2015, 2016 was a down year but the Street is expecting a reacceleration in '17 and '18. Estimates are still too high based on "flat to up" activity levels for the New Year which ignores the slow start to 2017.
- Article 50 risks a fumble: We think that anything but a smooth handoff on Brexit puts at risk the important UK market for Lazard. With the operating landscape in England subject to a 2 year reorg via Article 50, we are expecting a slough off in deals with uncertainty of the operating landscape.
- Active Managers under duress: While the company does have a niche in emerging markets and infrastructure, the active management business is under duress and gone are the days of even mid single digit growth. Staying long LAZ stock at this point, is in essence a short US dollar position because the company's AUM division does better when the US currency is weak.
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