Is Morgan Stanley (MS) Stock A Buy or Sell?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Morgan Stanley (NYSE:MS).

Is MS stock a buy or sell? Morgan Stanley (NYSE:MS) investors should pay attention to a decrease in support from the world’s most elite money managers of late. Morgan Stanley (NYSE:MS) was in 66 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 70. There were 70 hedge funds in our database with MS holdings at the end of September. Our calculations also showed that MS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Jeffrey Ubben of ValueAct Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind let’s view the key hedge fund action encompassing Morgan Stanley (NYSE:MS).

Do Hedge Funds Think MS Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MS over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Morgan Stanley (NYSE:MS) was held by Eagle Capital Management, which reported holding $894.3 million worth of stock at the end of December. It was followed by Greenhaven Associates with a $653.8 million position. Other investors bullish on the company included Fisher Asset Management, ValueAct Capital, and GQG Partners. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Morgan Stanley (NYSE:MS), around 12.31% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, designating 7.22 percent of its 13F equity portfolio to MS.

Because Morgan Stanley (NYSE:MS) has faced a decline in interest from the smart money, logic holds that there is a sect of money managers that elected to cut their entire stakes by the end of the fourth quarter. Intriguingly, Emanuel J. Friedman’s EJF Capital dumped the largest investment of all the hedgies followed by Insider Monkey, valued at close to $29 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $23.7 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Morgan Stanley (NYSE:MS). We will take a look at Sanofi (NASDAQ:SNY), The Boeing Company (NYSE:BA), Lowe’s Companies, Inc. (NYSE:LOW), China Mobile Limited (NYSE:CHL), Royal Bank of Canada (NYSE:RY), International Business Machines Corp. (NYSE:IBM), and Advanced Micro Devices, Inc. (NASDAQ:AMD). All of these stocks’ market caps match MS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNY 15 1145189 -5
BA 55 1057323 12
LOW 71 5192115 -12
CHL 13 275668 3
RY 18 177204 2
IBM 51 998446 11
AMD 74 6688629 3
Average 42.4 2219225 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.4 hedge funds with bullish positions and the average amount invested in these stocks was $2219 million. That figure was $5665 million in MS’s case. Advanced Micro Devices, Inc. (NASDAQ:AMD) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 13 bullish hedge fund positions. Morgan Stanley (NYSE:MS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MS is 72.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on MS as the stock returned 23.7% since the end of Q4 (through 3/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.