Deutsche Bank's Year-End Strategy For Brokers, Asset Managers And Exchanges

Deutsche Bank's Brian Bedell on Thursday released a year-end strategy guide covering the brokers, asset managers and exchanges.

In order of investment preference, Bedell favors exchanges, online brokers, large-cap asset managers, alternative managers and finally, trust banks.

Top Pick: Exchange Stocks

Bedell believes that exchange stocks will outperform the market and other subsectors over the next 12 months. The entire group is Buy rated, including recently upgraded NASDAQ OMX Group (NASDAQ: NDAQ) and Intercontinental Exchange (NYSE: ICE).

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Bedell views CME Group (NASDAQ: CME) and CBOE Holdings (NASDAQ: CBOE) as "much better volume-momentum plays" over Nasdaq and Intercontinental Exchange given the outlook for higher volatility in equity markets and interest rates.

Second Pick: Online Brokers

Online brokers remain Bedell's second pick. The analyst noted that normalization of U.S. interest rate policy and improving economic data are positive catalysts to fuel growth. Additionally, the continued organic growth trends and resilient retail trading environment support growth.

Bedell's top picks among the online brokers include Charles Schwab (NYSE: SCHW), which is best leveraged to early rate moves. TD Ameritrade Holding (NYSE: AMTD) is ranked second in the group.

Third Pick: Traditional Asset Managers

Bedell sees relative price-to-earnings shifting lower over the next 12 months for traditional asset managers, assuming the bull market continues to charge forward.

The analyst's top picks in the group include Blackrock (NYSE: BLK) followed by Affiliated Managers Group (NYSE: AMG).

Fourth Pick: Alternative Asset Managers

Bedell noted that alternative asset managers have been seen as unfavorable since the first quarter as "investors view prospects as "glass half-empty." The analyst sees solid return on investment potential given an improved economic growth, but sentiment needs to improve before investors should invest in the sector.

The Blackstone Group (NYSE: BX) is Bedell's top pick with "execution remaining solid."

Staying On The Sideline: Trust Banks

Finally, Bedell maintained a Hold rating on the trust banks. The analyst sees less leverage to higher rates than consensus for the trust banks given higher rate sensitivity to Europe.