Got $ 500? Here is 1 great stock to buy and keep
Investing in the stock market comes with certain risks, whether you like it or not. If you have $ 500 to invest in the stock market and don’t want to worry too much about losing value, there are probably a few things you should be looking for.
First, your investment should probably be in a large, stable company that is a market leader in its field. Second, the stock should be available at a relatively low valuation, with a clear path to growth. Third, the business must have multiple sources of income in order to be able to withstand market fluctuations, if any of its income sources face volatility. Finally, the company must have liquidity, available liquidity to face downturns and invest in its growth.
Morgan stanley (NYSE: MS) is a company that ticks those boxes and would make a good, safe place to park your $ 500 with a reasonable expectation of long term growth.
One of the best on Wall Street
When you think Morgan Stanley, you think Wall Street. This is a company that has been around since 1935 and is synonymous with Wall Street and investment banking. He’s pretty much a market leader since his inception – in his first year, he managed $ 1.1 billion in public offerings and private placements and had a 24% market share. Currently, it is the third investment bank behind Goldman Sachs and JPMorgan Chase in terms of income, but second in equity markets behind Goldman Sachs.
It has gained market share this year and is coming off a strong third quarter, where investment banking revenues grew 67% year-over-year and the segment had its best quarter of the year. history, thanks to a record quarter of consulting revenues. And with a significant number of transactions underway, this activity should continue to strengthen in the short term.
Overall, Morgan Stanley saw its net income jump 35% year-over-year to $ 3.7 billion. In addition, revenue increased by about 25% to $ 14.7 billion, of which about half, or $ 7.5 billion, came from Institutional Securities, which includes its investment banking and investment banking business. institutional negotiation. While this has been the lifeblood of the business, Morgan Stanley has taken steps in recent years to strengthen its other two businesses – Wealth Management and Investment Management – and it has helped its revenues and profits grow.
Acquisitions fuel growth
Morgan Stanley is not just one of the top two or three investment banks and trading companies in the country; it is the largest wealth management company in the United States. This is his business as a financial advisor and brokerage, and he owns around $ 1.24 trillion in assets, the most in the United States and the third in the world behind UBS and Swiss credit.
This business saw its revenue increase 28% in the third quarter year-over-year to $ 5.9 billion. Morgan Stanley has also been a leader in this field for a long time, but its acquisition of online brokerage firm E * Trade last year has given it a huge boost, as CEO James Gorman explained during the call for third quarter results:
“The wealth management business, which now includes E * Trade, of course, is growing its assets to levels far beyond what we’ve seen. In the first nine months, this company added over $ 300 billion in new net assets, compounding growth on a client asset base of over $ 4.6 trillion, and we believe this will be an economic driver for Morgan. Stanley for decades to come. ”
These two businesses have historically dominated Morgan Stanley’s revenue share, but another acquisition last year of asset manager Eaton Vance bolstered its third line of business, investment management. Just three years ago, investment management generated $ 653 million in third quarter revenue. In the last quarter, it generated $ 1.4 billion, an increase of 36% over the total for the third quarter of 2020. Three years ago, this segment accounted for 6.6% of revenue overall, this year it represents around 10%.
The investments made in the wealth management and investment business were strategic steps to give Morgan Stanley a more balanced business, so that if M&A activity slows down or trading activity declines, it can be offset by gains in wealth management or investment, which are less volatile companies. Plus, Morgan Stanley is pretty good value, with a price-to-earnings ratio of around 13, despite the stock price rising 52% year-to-date.
A good place to park your $ 500
Morgan Stanley is also in good financial health, with a Tier 1 common stock ratio of 16%, which is well above the required minimum of 13.2% set by the Federal Reserve.
In addition, it has around $ 5.3 billion in cash and its debt-to-equity ratio is around 2.2, which is lower than it has been in the past 10 years, while its current debt ratio, the ability to repay short-term debt, is higher than it has been in recent years. These are two good indicators, given that the company has made two big acquisitions.
Morgan Stanley has been a good investment for decades, averaging 20.5% annualized return over the past decade. It remains a good investment and he may be even better off now, given the recent acquisitions he has made. This stock seems like a great place to park your $ 500 – which would buy you around five stocks at its current price of $ 104 per share.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.