Morgan Stanley

MS-N

(A Top Pick May 07/18, Down 8%) US banking has been under pressure, but MS is well-positioned. They're the largest wealth manager in America. It's cheap now.

MS reported well, unlike some of its peers. It could return to $55 this summer. (Analysts’ price target is $53.92)

US banks missed in Q4 then recovered in Q1. Since then, trading in these banks has been low. Long-term this is a good franchise. You can buy on dips. An excellent franchise.

Steady decline. For him, $41 is key, so would probably see another 7-8% down from here. Some of the indicators starting to turn down. Look at the S&P and ask if this is a good place to deploy money, relative to the index? Still declining in relation to the S&P. Between $30-40, it's anyone's game, so look at interest rates.

It is not a pure bank and has changed itself over the last few years. More than 50% of business is from wealth management and M&A. They are below 10 times earnings. This is a good time to own this one. (Analysts’ price target is $51.98)

They had a tough fourth quarter bond trading. They are a class act. The managed wealth business is going to continue to grow them. (Analysts’ price target is $51.83)

45% of their business comes from their wealth management division which is where you want to be because active investment is big.

Sometimes you have to go back to the basics. It is showing lower highs. On a down trend.

U.S. banks have sold off because the net interest margin has compressed. Even if interest rates rise, there'll be a drag, because this compression continues. MS is a well-run bank long-term, and current levels are attractive. But he prefers other US banks like BAC which has a more diversified footprint than MS.

It is really a business of trading and asset management. They have over $2.5 trillion under management. He sees this as being less volatile than competitors as a result. He likes it.

He's still bullish on American banks and their economy. That said, the flattening yield curve contributes to a challenging environment. He prefers Morgan-Stanley for its wealth management...

US banks are on sale right now. Has morphed from global investments to largest wealth manager in US, a very stable business. Trading at 9x earnings. Incredibly well capitalized, stock buybacks, and increasing dividend. Going to be a dividend grower over the next few years. At this valuation, comfortable stepping in.

Morgan Stanley vs. Goldman Sachs They're similar--they're in investment banking, but he prefers MS with its cheaper valuation with steadier earnings growth and less earnings volatility. Goldman is more into investment banking which is vulnerable to a market downturn, thus a little more volatile. Overall, he is light U.S. banks: there's slower loan growth and the cost of loaning money has risen along with interest rates. Analysts have been too optimistic about American banks' earnings growth going forward.