The Makeover: Morgan Stanley’s Strategy of Lower Risk may be New Model for Wall Street

June 7, 2014

Chris Grisanti was quoted in Barron’s concerning our long-term investment in Morgan Stanley.  One of our most profitable investments in the last three years, Morgan Stanley remains a core financial holding..  Here’s the excerpt that discusses Morgan Stanley’s move away from trading and towards investment management, with its more stable revenue stream: 

Barron’s  (June 7, 2014)

The Makeover: Morgan Stanley’s Strategy of Lower Risk may be New Model for Wall Street

By Avi Salzman

….Big banks, of course, still carry sizable risks. Morgan Stanley’s legal expenses remain unpredictable, rising to $1.95 billion in 2013 from $513 million the previous year because of lingering litigation and investigations over mortgage-backed securities. But analysts see less legal risk for Morgan Stanley than for rivals like Bank of America.

The second quarter could prove rocky for Morgan Stanley and other banks, some of whom say trading is down 20% or more. But Morgan Stanley is getting better at weathering bad news. Even if the economy sputters, the company’s successful restructuring gives investors another reason to buy, argues Christopher Grisanti, a principal at Grisanti Capital Management, which held more than 400,000 shares at the end of the first quarter.

“To invest in the other banks, you’re investing because the world is getting back to normal,” Grisanti says. “But for Morgan Stanley there’s a transformation taking place. They’re transforming themselves into a company that has more reliable cash flow and doesn’t risk its balance sheet to produce it.”

The second quarter could prove rocky for Morgan Stanley and other banks, some of whom say trading is down 20% or more. But Morgan Stanley is getting better at weathering bad news. Even if the economy sputters, the company’s successful restructuring gives investors another reason to buy, argues Christopher Grisanti, a principal at Grisanti Capital Management, which held more than 400,000 shares at the end of the first quarter.

“To invest in the other banks, you’re investing because the world is getting back to normal,” Grisanti says. “But for Morgan Stanley there’s a transformation taking place. They’re transforming themselves into a company that has more reliable cash flow and doesn’t risk its balance sheet to produce it.”