From Toast to Toasted

Stifel Financial Corporation looked like toast back in the mid-1990s. But today, at age 108, the St. Louis–based brokerage and investment banking firm has survived Wall Street’s rough-and-tumble, merger-a-minute atmosphere and is flourishing amid a dwindling handful of peers.

Eight years ago, a lone broker opened the first Stifel Financial subsidiary in the Twin Cities—Stifel Nicolaus & Company, Inc. About that time, the firm lost out to a Miller Johnson affiliate in a bid to buy the R. J. Steichen and Kinnard investment firms here. But late in 2006, Stifel acquired the retail brokerage unit of Miller Johnson Steichen Kinnard (MJSK) for $7.8 million. (As of January 30, MJSK was still registered as a broker-dealer, but it appears the firm has shut down.) Today, largely thanks to that deal, Stifel has 110 employees and eight offices in Minnesota.

“It added scale to Stifel and allowed MJSK reps to offer a broader array of products and services,” says Joe Buska, manager of Stifel’s Golden Valley office.

Most of Stifel’s 68 Minnesota brokers work out of offices in the metro area, and the rest are in Rochester, St. Cloud, and New Ulm. Longtime Twin Cities securities analyst Ben Crabtree signed on in mid-2006. Crabtree and associate Stephen Geyen, who once worked together at Piper Jaffray, study the moves of 23 publicly traded Midwest banks from Stifel’s office in downtown Minneapolis.

“Stifel has successfully transformed its business from a small, Midwest-focused retail broker into a diversified regional brokerage firm,” writes Lauren Smith, a securities analyst at New York–based financial services firm Keefe Bruyette & Woods, which initiated coverage of Stifel (NYSE: SF) in a report that was published in September. She gave the firm an “outperform” rating.

The Keefe study found that the stock’s 168 percent return from 2004 through 2006 topped the returns of 20 broker-dealers, including national icon Goldman Sachs and local mainstay Piper Jaffray. Stifel ranked second over the five years through 2006, and third in the first half of 2007. Since 2001, Stifel’s core earnings per share have grown at a compounded annual rate of 72 percent.