David Burrows Morgan Stanley MS-N BUY Nov 06, 2024

An investment-focused name. Bit more leverage, bit more beta. Likes this space, but it's not as conservative as the money-centre banks.

They report Wednesday. Bears kept tearing apart their wealth management business, but investors buy on any weakness. Pays a 3.5% dividend. Hold on.

Investment banks don't get a lot of love because earnings are so cyclical. Investors will put a different multiple on cyclical earnings versus steady earnings. Phenomenal job transitioning to more of a wealth manager; gives a lot more earnings durability. Prefers it to GS. Would not add here, valuation's too rich; wait for pullback.

They just delivered a strong Q3: +56% investment banking YOY, 22% equity trading YOY with an efficient 72% expense ratio and 17.5% return on common equity, a major beat. The wealth management business is booming with $64 billion of new assets.

Excellent company that has owned for ~10 years. Will continue ownership. Very high quality business with strong balance sheet, and ability to generate profits. Management very strong with good capital allocation skills. 

The question was on his preference of this group of wealth management companies. He owns all three for different reasons. The possible lack of regulation under the new administration has already boosted them. They are in excellent financial shape and have good dividend growth. It is not an expensive sector.

This week, they delivered a big revenue and earnings beat. Investment banking revenue rose 25% and equity 51%. Strong expense control as seen in their 69% efficiency ratio and bought back $750 million in shares. The sky is the limit for these guys. 

He's most excited about banking de-regulation, loosening constraints as a result of the 2008 banking crisis. De-regulating will loosen a lot of capital, so he owns MS in anticipation.

They announced lay-offs, but no financial advisors. 70% of earnings come from the wealth business. They have a strong balance sheet and pay a 3% dividend yield that's growing. MS is-5% this year. The time to buy.