Morgan Stanley (MS)

Came out with fairly disappointing numbers. The volatility in the 3^rd quarter really whacked the investment banks. All this has really done is to bring it back to where it was in 2011. If that volatility is not going to continue at the same level, you would have to think this is one of the better run and more tightly run investment banks. Also, it doesn’t have the commercial banking side as a distraction. If you want to be in an investment bank, this is one of the ones that you should consider.

(A Top Pick July 10/14. Up 11.11%.) Has been very positive on this company for a long time. A great wealth management business, on par with Merrill Lynch’s wealth management business in the US. One missing piece for them has been the lending side. Now that they have the charter to lend, they can increase and capitalize on that. This is a great avenue for them to grow revenue that they hadn’t had before. Doing very well on investment banking. The fixed income business is recovering. They are a big beneficiary of a rising interest rate environment. (Screen showed it as a loss, but Mark rightly pointed out that it was a gain.)

Bank of America (BAC-N) or Morgan Stanley (MS-N)? He thinks there is a lot more value in US banks than in Canadian banks. Doesn’t really have a preference between these 2. The US Bank ETF is a pretty good buy in here. What would really help you is to look at a stock chart and look at the 40 week or 200 day moving average and look where the stock is compared to that average, because it should supply some support.

He feels this bank will continue to make money, but not his favourite. He prefers Goldman Sachs and JP Morgan which he owns. He likes Goldman Sachs for their underwriting and likes JP Morgan for their scope which is enormous.

Loves the company, but he classifies it as having gotten beaten up rather badly. It is the one that did the best fundamentally.

Prefers Goldman Sachs (GS-N). The environment is still very, very solid, and we still haven’t seen a huge M&A environment, which will be a huge money maker for investments banks over the next couple of years.

There was a lot of regulation coming out of the recession. MS-N is moving rapidly towards asset management (55% of revenue). It is a stable business where they deal with a very high end client. Thinks their dividend could go up 100-150% over the next year. Believes investors will be prepared to pay a higher multiple as they recognize that risk levels have come down due to new regulations.

Has no idea where they are going short term. The US banking segment is currently on sale because interest rates are at such low levels. Over the longer term, higher interest rates will benefit them. It is a story of debt trading through to equity trading.

Very well run company and very well-positioned to take advantage of the M&A theme and increasing IPO activity. Being an investment bank, as opposed to a more full service bank, it is really well-positioned. Not expensive at 12.5X earnings. He can see more upside. A good one to hold.

This is still one of his top names in his growth fund. With their wealth management business, they have a great opportunity. Shift to a fee-based model should lead to more predictable earnings. Yield of 1.27%.

P/E ratio and PEG seem pretty compelling at this particular time. Sometimes with these companies, you can get thrown a little bit of a curve because of using a metric that may not be the best. In terms of banks and M&A type companies, looking at it from an earnings standpoint may not be the best bet. Looking at BV and discounted premium to BV may work a little bit better. Trades at a discount to BV, which is attractive, but has a bigger bond exposure than some of the others.

Investment bank is doing fine. They have restructured operations. Feels US financials are undervalued. Have a lot of earnings upside potential.

Trading at a discount to book value. She owns C-N, which has many of the same drivers. You are seeing ROEs coming up across the board.

Not as strong financially and more exposed to fixed income market and a higher exposure to Europe.

Owns C-N and JP-N. MS has rich valuation, 2.05 peg ratio (PE over growth).