Every December, the big Wall Street firms quietly circulate their “best ideas” lists to their top clients. Most of the names are familiar – the usual mega-caps everyone already owns. But occasionally, one firm slips in a lesser-known company that makes you sit up and take notice.
This year, that company comes from Goldman Sachs, and honestly? It feels refreshingly different.
The Under-the-Radar Name With Serious Potential
While everyone obsesses over the latest tech darling or AI play, Goldman analysts have crowned a decidedly old-school winner for 2026: Houlihan Lokey. Yes, an investment bank. No, not one of the bulge-bracket giants you hear about daily.
This Los Angeles-based firm, with a market cap around $12 billion, has flown completely under most investors’ radar. The stock barely moved in 2025 – actually sitting flat year-to-date as of early December. But according to Goldman’s team, that’s about to change in a very big way.
Their price target? A bold $237 per share. From recent levels around $174, that implies more than 36% upside over the next twelve months. Not exactly small change.
Why This Investment Bank Stands Out
Let me be honest – when I first saw the name, I had to look it up. Houlihan Lokey isn’t the kind of firm that makes headlines for billion-dollar IPOs or trading scandals. They’re specialists. They focus on mid-market deals, financial restructuring, and advisory work that bigger banks often consider too small or too complex.
And in today’s uncertain environment, that specialization might be pure gold.
Think about it. We’ve spent years in a zero-interest-rate paradise where companies could refinance forever and M&A activity stayed red-hot. But cracks are showing. Corporate debt loads are massive. Private equity sponsors are sitting on mountains of dry powder but facing higher borrowing costs. The easy deals are getting harder.
That’s exactly when firms like Houlihan Lokey start to shine.
The Restructuring Moat Nobody Talks About
Here’s the part that really caught my attention: roughly 22% of Houlihan Lokey’s revenue currently comes from restructuring advisory. That’s corporate speak for helping companies navigate bankruptcy, debt renegotiations, and distressed situations.
In a booming economy? That business line just hums along quietly.
In a downturn? It becomes rocket fuel.
“Best-in-class protection from an economic slowdown through its restructuring business and its skew to the healthier mid-cap and sponsor M&A segments.”
Goldman Sachs equity research
I’ve followed markets long enough to know that true defensive growth stocks are rare. Most companies either grow fast in good times and get crushed in bad times, or they plod along forever with mediocre returns. Finding something that actually performs better when the economy weakens? That’s the holy grail.
A New CEO With a Different Playbook
Another factor working in the company’s favor: new leadership with a clear growth agenda.
Scott Joseph Adelson took over as CEO, and from everything coming out of the firm, he’s shifting priorities. Where previous management focused heavily on returning capital to shareholders, the new direction emphasizes strategic acquisitions – those “bolt-on” deals that can quickly expand capabilities and geographic reach.
The beauty here? In a tougher investment banking environment, acquisition targets become cheaper and more plentiful. The strong get stronger by scooping up talent and client relationships at bargain prices.
Houlihan Lokey already has a proven track record here – typically completing several acquisitions each year. Market participants expect this pace to continue or even accelerate.
- Enhanced service offerings through new expertise
- Expanded geographic footprint
- Immediate revenue and earnings accretion
- Strong cultural fit (they’ve done this successfully before)
The Margin Story Deserves Attention
One aspect that doesn’t get enough credit: Houlihan Lokey’s expense discipline. While many financial firms balloon their cost base during good times only to face painful cuts later, this management team has shown remarkable control.
Profit margins have stayed remarkably stable through various market environments. That kind of operational rigor matters more than ever when revenue growth becomes harder to come by.
Combine that stability with potential tailwinds from both restructuring work and acquisition-driven growth, and you start to understand why analysts are getting excited.
Don’t Ignore the Dividend
While not a high-yield play, Houlihan Lokey does pay a respectable dividend – currently yielding about 1.37%. In a world where quality income options feel increasingly scarce, that’s worth noting.
More importantly, the payout appears sustainable and growing. For investors looking to get paid while waiting for the broader thesis to play out, it’s a nice bonus.
How This Fits Into a 2026 Portfolio
Look, nobody knows exactly what 2026 will bring. We might get the much-discussed soft landing. We could see a sharper slowdown. Interest rates might stay higher for longer.
The beauty of this particular pick? It has pathways to win in multiple scenarios.
- Bull case: M&A activity rebounds strongly, mid-market deals flourish, acquisitions prove synergistic
- Base case: Choppy markets keep restructuring busy while corporate finance work remains decent
- Bear case: Significant downturn drives massive restructuring demand, potentially overwhelming the current 22% revenue contribution
Few companies can legitimately claim that kind of scenario resilience.
The Bottom Line
Sometimes the best opportunities aren’t hiding in the latest hot sector or trending theme. Sometimes they’re sitting right in front of us, doing what they’ve always done well, just waiting for the macro environment to shift in their favor.
Houlihan Lokey appears to be exactly that kind of opportunity as we head into 2026 – a high-quality financial firm with multiple growth drivers, defensive characteristics, and what looks like significantly undervalued potential.
Wall Street’s conviction lists come and go. Most names fade from memory within months. But every once in a while, they highlight something truly special.
This time around, that something special might just be a Los Angeles investment bank that most investors have never heard of.
Yet.
Note: All investment decisions should be made based on your own research and risk tolerance. Past performance is no guarantee of future results.
