Von Aldo

Bernstein Research Says Buy Morgan Stanley Smith Barney Shares

Actually, Morgan Stanley Smith Barney is rated an outperform by the research group, but is an implied buy, really. We've always respected Sanford C. Bernstein, now owned these past many years now by Alliance Capital, and its top-qualilty research. But can analyst Brad Hintz be right whhen he says, "Bernstein believes MS stock could pay off handsomely to investors?" Read on for his case.

MSSB's stock has been hammered over the past year (down from its 52-week high of $35.78), and has a big job in getting its new broker platform integrated. (It has missed a few milestones on that note, but I have seen its new tech interface and it's impressive---pity it's going to take a while to get the Smith Barney side of the house integrated. As Hintz notes, "Unfortunately, Morgan Stanley is still in a rebuilding mode, and it is not the firm that it used to be." He continues that MS is no longer the blue-blooded Ivy institution of the past that used to counsel "America's most powerful companies"; no, that firm "has given way to a more plebian firm focused on expanding retail brokerage and rebuliding its core institutional business."

Hintz, who once served as CFO of Lehman many years ago, sums up thusly: "Bernstein believes MS stock could pay off handsomely to investors. MS' retail brokerage joint venture with Citigroup will ultimately give MS control of the largest domestic retail platform as measured by both number of brokers and client assets. This 'new' Morgan Stanley will lead an oligopoly of mega-retail channel distributors---along with BAC, WFC and SCHW---that will likely dominate the brokerage market in the coming decade. . . . So, Morgan Stanley will be less reliant on trading and have a lower-risk business model, control the leading market share position in retail brokerage, and maintain its ranking in M&A advisory and equity capital markets."

Hintz rates MSSB an outperformer. But then he's had a buy on MSSB all year, if I remember correctly.

Hmm . . . "control the leading market share position in retail brokerage?" Thems fightin' words, since ML has been outperforming MSSB of late.

What do you think? Who would you rather work for?

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