Goldman Sachs is the best managed company in the financial sector, while Citigroup stock is the cheapest, Rochdale Securities Banking Analyst Richard Bove said Thursday.
Citigroup has the potential to reach $20 a share, and if so the stock can triple in two to three years, Bove told “Squawk Box.”
“That’s more than Goldman Sachs will give (to investors), although they are a much better company,” he said.
Bove also criticized those investors selling Goldman shares after its third-quarter earnings results. The company easily beat estimates, but the stock fell before hours, with many traders hoping for even better numbers given JPMorgan Chase’s strong capital markets results out Wednesday.
Investors were over-enthused about these numbers because of JPMorgan’s numbers, “anybody who is buying this stock based on one quarter’s results should get out of it,” he said.
“I would argue that (Goldman’s earnings are) stronger than JPMorgan’s if you look at the whole company,” with JPMorgan doing badly on the traditional bank side of the business, he said.
“There is no reason not to be buying (Goldman) at this time,” he said.
M&A Boom on the Horizon
The investment banking market that Goldman is serving “is now growing fairly rapidly,” Bove said.
“In 2010 we’re likely to see the biggest explosion in mergers and acquisitions that we’ve ever seen and Goldman will be a main participant in that,” he said.
“The fact is that (Goldman’s third-quarter earnings are) always below the second quarter number because investment banking activity dries up in the summer,” Bove added.
People don’t want to bring stocks to market in the summer season and trading activity cools down because of vacations, he said.