​Why Morgan Stanley Is Having Its Best Year Since 2006

MoneyShow |

Image via Alex Proimos/Flickr CC

Bank stocks and financial firms are back in style, now that interest rates are rising again and improving net investment income, observes Mark Skousen, editor of The 1600 Alert, an advisory service focused on political trends that impact the markets and individual stocks.

The potential tax reform pushing its way through Congress also could boost bank earnings. We have a prime example in our portfolio.

Morgan Stanley (MS) has been a big winner for us, and it is now enjoying a double-digit-percentage gain. According to Barron’s, Morgan Stanley is now America’s top bank, and has an upside potential gain of 20% by the year's end.

Business is booming. The banking giant is having its best year since 2006. It already has brought in a net income of $5.5 billion since the beginning of the year through the end of September.

The key to Morgan Stanley’s success gradually has been shifting from high-risk trading in stocks and bonds to wealth and asset management.



Assets under management have grown to more than $1 trillion from around $700 billion in 2014. The bank’s lending balance also has risen from a mere $39 billion at the end of 2013 to around $80 billion today.

The interest income it earns within the wealth management division has risen $1.6 billion over a similar time period, going from $1.9 billion in 2013 to $3.5 billion last year. That income could climb to as much as $4 billion this year, according to Barron’s.

This is not to say that Morgan Stanley has abandoned its trading division. The bank did top CEO James Gordon’s $1 billion quarterly target for bond trading revenues in the most recent quarter.

Morgan Stanley’s stock is still relatively cheap, trading at 12.5 times estimates of forward earnings, below the industry average of 18.

Its price/earnings to growth (PEG) ratio is 0.98 (anything less than 1 is considered excellent). It also has had a rising dividend policy since the financial crisis of 2008.

Mark Skousen is editor of several newsletters, including his new The 1600 Alert.

Subscribe to Mark Skousen's The 1600 Alert here…

About MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
MS Morgan Stanley 49.06 -0.03 -0.06 2,692,946 Trade

Comments

Emerging Growth

OncoSec Medical Incorporated

OncoSec Medical Inc is a biotechnology company focused on designing, developing and commercializing gene therapies, therapeutics and proprietary medical approaches to stimulate and guide an anti-tumor immune response for the…

Private Markets

Voleo

Voleo is a free download that allows you to form investment clubs with your friends, family, colleagues, classmates, teammates…basically anyone you know and trust. Invest and manage a stock portfolio…

The Green Organic Dutchman

The Green Organic Dutchman Ltd. ("TGOD") produces farm grown, organic cannabis for medical use. The company grows its high quality organic cannabis in small batches using craft growing, all natural…