Morgan Stanley (NYSE:MS) is one of the largest investment and asset management companies in the United States, but is actually the smallest of my “big three,” the others being Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM). With the recent pullback in the sector, Morgan Stanley (NYSE:MS) is now about 10% below its 2-week high reached just a few weeks ago, and is trading for a particularly attractive valuation.However, what I want to know is how Morgan Stanley (NYSE:MS) stacks up to the others, and if it is the best option for our portfolios.
About Morgan Stanley (NYSE:MS)
Morgan Stanley (NYSE:MS) is one of the largest financial services firms, with about $800 billion in total assets. The company operates through three main segments: Institutional Securities, Global Wealth Management, and Asset Management.
The Institutional Securities Group makes up 40% of the company’s revenues and provides a wide range of services. In addition to investment banking services, the segment also provides market-making services, risk management analysis, and financial advisory services. Morgan Stanley (NYSE:MS)’s investment bank is one of the biggest in the world, and actually ranks second in the world in M&A activity and third in IPO’s.
Global Wealth Management is the company’s most lucrative, producing over half of their revenues last year. This segment provides brokerage, investment advisory, wealth planning, and banking services, in addition to offering annuities, insurance products, and more. The segment provides these services through Morgan Stanley Wealth Management, formerly Morgan Stanley Smith Barney (MSSB), of which it owns a majority stake (65%) with Citigroup Inc (NYSE:C) owning the rest. Morgan Stanley has expressed its intention to acquire the rest before the end of 2015, which I think will add stability to the company, shifting more of its revenues toward wealth management and away from trading activities.
Finally, the company’s smallest segment is Asset Management, which accounts for 8% of revenues and provides services to institutional clients in regards to equities, fixed income investments, and other types of investments.
Growth and Numbers
With the terms for purchasing the rest of the wealth management business completed, there is a lot of potential for the company to grow this side of its business, the revenue from which tends to be much more stable than revenues from investment banking. Just from a quick calculation based on the revenue makeup of last year and the amount of MSSB the company owned last year (they owned 51% until late September), once the company finalizes the acquisition of the remaining 35%, the Global Wealth Management Group will account for about 67% of the company’s revenue, making it even more important to Morgan Stanley’s bottom line than it already is.