Goldman, Merrill Lose in Bank Rally Since July 15: Chart of Day

By Bradley Keoun
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Aug. 22 (Bloomberg) -- Goldman Sachs Group Inc. and Merrill Lynch & Co. have missed out on the rally in bank and brokerage stocks since July 15, the day Second Curve Capital LLC's Thomas Brown says financial stocks ``made their bottom.''

The CHART OF THE DAY shows the divergence between the two brokerage firms and the benchmark Amex Securities Broker/Dealer Index, which climbed almost 11 percent through yesterday since falling to the lowest level in almost four years on July 15. Goldman, the biggest U.S. securities firm by market value, fell 0.9 percent in that period, while Merrill, the third-largest, was down 0.4 percent.

Lehman Brothers Holdings Inc., the No. 4 firm, gained 3.8 percent even while buffeted by speculation it may be forced to sell shares or businesses to raise capital. Morgan Stanley, the No. 2 investment bank, surged 20 percent. The KBW Bank Index, which tracks 24 commercial bank stocks, is up 28 percent. Its worst-performing member, Bank of New York Mellon Corp., climbed 0.4 percent.

Brown, who as a Donaldson, Lufkin & Jenrette bank analyst topped Institutional Investor's analyst ranking eight times in the 1980s and '90s, believes financial-stock ``valuations are compelling,'' according to his blog, bankstocks.com. When it comes to Goldman and Merrill, investors aren't so sure.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.