OPY - Oppenheimer- A Takeover Target in Wealth Management
Oppenheimer Holdings (OPY) is a premier wealth management and advisory firm that is trading at historically cheap valuations and at a massive discount to its peers, asserts Douglas Hughes, editor of Bank Newsletter.
The firm's earnings per share are set to increase in the coming quarters. Oppenheimer is relocating its headquarters to a cheaper building in New York, which will result in a reduction in expenses. In addition, spending on upgrades in technology and infrastructure is complete.
A share buyback is in progress and a new buyback plan to be announced soon. While increasing EPS, this should put a floor on the stock at $20. The bank has bought back 8%-10% of the float in the past 6 months.
Among publicly traded financial advisory and asset management firms, OPY is one of the cheapest. It is on pace to earn over $3.60 per share in 2020.
The stock also trades at 67% of its tangible book value which is $34 per share. Over the last 3 years, the tangible book value has grown by 14% per year but the stock price has not kept pace.
Management interest is aligned with shareholder interest The CEO of OPY is Alfred "Bud" Lowenthal and he has run OPY for the last 32 years. Bud owns 25% of the common shares and 98% of the class B shares.
Lowenthal is looking to retire soon and no obvious successor is identified. His son does not seem to be in the running to take over either. It would make great sense for him to sell to a larger bank given the huge discount and while AUM is at all-time highs.
The need for OPY’s services is growing fast which has resulted in OPY growing EPS and book value at a rapid pace. However, the share price has not kept up with improving fundamentals. This makes OPY a prime takeover target for investment firms like Stifel.
Long time insiders and employees own most of the company and it is in their interest to sell. If OPY remains a standalone firm, it has the resources to withstand turbulence in the market as it is one of the least leveraged firms on Wall Street.