U.S. Investment Banks

Reuters put out a bullish article on investment banking for 2006. Some interesting notes from the article is that bond underwriting has remained stable while M&A activity continues to grow. I believe M&A activity will continue briskly because corporations are loaded with cash and are facing slower organic growth, especially domestically. I am not a big fan of the P/E ratio but Goldman Sachs (GS), Lehman Brothers (LEH), Morgan Stanley (MS), Bear Sterns (BSC), and other invetment banks should see multiple expansion once the fed is done. In my opinion, they all deserve to trade at 15x 2007 earnings. That is about 20+% upside from current levels.

Note:
Long: Lehman Brothers (LEH)
Short: None
Options: None