Lazard: Mergers & Acquisitions

03/24/2017 2:50 am EST

Focus: FINANCIALS

Richard Stavros

Analyst, Global Income Edge, Utility Forecaster and Personal Finance

President Trump’s policies, a stronger dollar, healthier global growth and cheap debt (for now) are shaping up as the perfect conditions for a big wave of corporate mergers, asserts Richard Stavros, editor Investing Daily's Personal Finance.

That means big business and big profits for the firms that help make those mergers happen, and one such firm is merger adviser and asset manager Lazard (LAZ), which we added to the Income Portfolio last year.

Lazard is the world’s premiere, independent strategic adviser for everything from mergers and acquisitions to corporate finance to asset management.

The company has provided that advice to CEOs, governments and institutions for more than 168 years and consistently ranks in the top 10 for merger advice.  

Trump’s election only boosts our case for investing in Lazard. His policies for cutting taxes or allowing companies to repatriate funds from overseas, for example, will give companies more cash and incentive to merge, particularly if cheap debt or high stock prices persist to support financing these deals.

Plus, the strong dollar makes overseas firms, particularly those in Europe, cheaper and more attractive for U.S. companies to buy, and Lazard is one of the most dominant firms in the U.S. and European merger market, if not the world.

Furthermore, Trump’s plans to boost infrastructure spending will also spur more mergers in the U.S. as energy and utilities firms look for ways to enhance their economies of scale and expand. Together, all this adds up to a potentially stronger financial performance from Lazard this year.

But the firm’s reputation for integrity and unbiased advice is what attracted us most to this income investment. The company emerged from the 2008 financial crisis untouched by scandal.

On paper, Lazard seems perfect, but we would have preferred the stock to have a low beta, which means the firm’s shares won’t move in tandem with the market. Nevertheless, on our SHIELD stock-rating system, Lazard scores an 8 out of 10, indicating a high level of income safety and potential share price growth.

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