This week’s Stock of the Week is huge in its field and working hard to reduce risk and grow revenue.
Morgan Stanley (MS), one of the world’s major diversified financial institutions, has made efforts to lower its risk profile since the 2007-2008 financial crisis. It is emphasizing less capital-intensive, less volatile areas of its business, focusing more on wealth and asset management and less on trading and investment banking.
It now has three main areas of operation, all of which have had improved performance so far this year. Its institutional securities division contributes 55% of revenue…wealth management, 39%…investment management, 6%. All three account for big numbers: Revenue was $37.9 billion last year and will likely be $41 billion this year and $42.6 billion in 2019. Wealth management holds client assets of $2.4 trillion…asset management, $469 billion.
Morgan Stanley continues to reduce its risk exposure in a methodical way and consistently repurchases its own shares. Its size makes it subject to strong regulatory oversight, but its risk-reduction approach not only makes its revenue and earnings less cyclical but also helps it conform to government requirements. The dividend of $1/share/yr. recently yielded 1.9% and appears secure.
Fiscal year: December. Earnings per share: 2019 est./$5…2018 est./$4.50…2017/$3.07.
Peter W. Tuz, CFA, CFP, is president, Chase Investment Counsel, which manages $325 million, and portfolio manager of the $79 million Chase Growth Fund (CHASX) and $24 million Chase Midcap Growth Fund (CHAMX), Charlottesville, Virginia. ChaseInv.com