4. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 52
Morgan Stanley (NYSE:MS) is a financial holding company that provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa, and Asia. On December 20, Jim Cramer said during his Mad Money show on CNBC that he liked Morgan Stanley stock heading into 2023 because higher rates are huge for their bottom line.
On December 20, Citi analyst Keith Horowitz maintained a Buy rating on Morgan Stanley (NYSE:MS) stock and raised the price target to $100 from $90, noting that the company’s market valuations and trading outlook were updated.
At the end of the third quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $3.3 billion in Morgan Stanley (NYSE:MS), compared to 58 in the preceding quarter worth $2.99 billion.
In its Q3 2022 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and The Morgan Stanley (NYSE:MS) was one of them. Here is what the fund said:
“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.
Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…read more
