Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Finance

Is Morgan Stanley (MS) Making Money?

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Wall Street is thriving at Morgan Stanley (MS). The investment bank’s quarterly revenues grew by $2.783 billion in 2020.

In detail, Morgan Stanley (NYSE: MS) began 2020 with quarterly revenues of $10.857 billion on 31 December 2019. Those quarterly revenues grew to $13.64 billion on 31 December 2020.

Impressively, Stockrow estimates Morgan Stanley’s revenues grew by 25.63% in the quarter ending on 31 December 2020. The quarterly revenues grew by 30.94% in the quarter ending on 30 June 2020 and 16.2% in the quarter ending on 30 September 2020. However, the quarterly revenue growth rate shrank by 7.77% in the quarter ending on 31 March 2020.

Mr. Market noticed Morgan Stanley’s success. Mr. Market paid $39.58 for Morgan Stanley on 13 April 2020 and $79.53 for Morgan Stanley on 13 April 2021.Those, Morgan Stanley’s share price more than doubled in the pandemic year.

Morgan Stanley makes more money

Morgan Stanley (MS) made more money in 2020. The bank’s quarterly gross profit grew from $10.224 billion on 31 December 2019 to $12.864 billion on 31 December 2020.

Similarly, the quarterly operating income grew from $2.733 billion to $4.43 billion in the same period. Thus, Morgan Stanley is making money.

Impressively, Morgan Stanley’s quarterly ending cash flow grew from $2.515 billion on 31 December 2019 to $10.882 billion a year later. Similarly, the quarterly financing cash flow grew from $9.214 billion to $34.859 billion in the same period.

I think Morgan Stanley could make more in 2021 because it is spending more money. For example, Morgan Stanley’s negative quarterly operating cash flow fell from -$136 million on 31 December 2019 to -$25.39 billion on 31 December 2020.

Impressively, Morgan Stanley’s cash and short-term investments grew from $276.944 billion on 31 December 2019 to $334.279 billion on 31 December 2020. Thus, Morgan Stanley’s cash and short-term investments grew by $57.335 billion in 2020.

Why is Morgan Stanley Growing?

I think Morgan Stanley (NYSE: MS) benefits from two pandemic-driven trends.

First, the explosive growth of the US stock market. For example, the S&P 500 grew from 2,762 on 13 April 2020 to 4,125.60 on 12 April 2021. Thus, people are putting more money into the markets which benefits investment banks.

Second, the economic chaos and job loss during the pandemic scared many more people into saving and investing. For example, the US personal savings rate shot up from 7.5% in April 2019 to 33.7% in April 2020, Statista estimates. However, the savings rate fell to 13.6% in February 2021.

When people save, they invest more. Saving and investing shot up because many people realized their income sources; jobs and businesses, could disappear overnight. Hence, wanted extra money and additional income sources such as stocks.

What is Morgan Stanley?

Those trends are good for traditional investment banks, such as Morgan Stanley.

Morgan Stanley (NYSE: MS) is a historic American investment bank formed in 1935. Henry Sturgis Morgan; J.P. Morgan Senior’s grandson, Harold Stanley, and other partners formed Morgan Stanley when the Glass-Steagall Act ordered commercial banks out of the investment markets.

Today’s Morgan Stanley began in 1997 when Morgan Stanley merged with Dean Witter Discover & Co. The company took the name Morgan Stanley in 2001.

Morgan Stanley offers many services including Wealth Management, Investment Banking, access to Capital Markets, Sales & Trading, Research, and Investment Management. Hence, Morgan Stanley provides financial services to rich people.

Morgan Stanley’s Business is Growing

Morgan Stanley’s business is growing because there are more rich people and those rich have more money. For example, Statisa estimates that there 5.91 million high net worth individuals in the United States in 2018.

The number of millionaire households in America grew from 7.5 million in 2011 to 10.5 million in 2020, Statista estimates. However, the number of American millionaire households fell slightly from 11 million in 2019.

Similarly,the total US billionaire wealth grew by $1.3 trillion or 44% between March 2020 and 24 February 2021, Inequality.org estimates. In total, the wealth of America’s 664 billionaires grew from around $3 trillion on 18 March 2020 to $4.3 trillion on 24 February 2021.

Thus, Morgan Stanley’s customers, rich people, have more money to spend.

What Value Does Morgan Stanley Have?

Morgan Stanley (MS) added value in 2020. For instance, Morgan Stanley’s total assets grew from $902.604 billion on 30 September 2019 to $955.940 billion on 30 September 2020.

Interestingly, Stockrow offered no total asset number for Morgan Stanley on 31 December 2020. However, I estimate Morgan Stanley’s total assets were $1.116 trillion on 31 December 2020.

To explain, Stockrow estimates Morgan Stanley had $582.613 billion in total current assets and $533.249 billion in total non-current assets on 31 December 2020. My calculator says adding those numbers equals $1.115.832 trillion.

Interestingly, Morgan Stanley’s total current assets grew from $463.227 billion on 31 December 2019 to $582.613 billion on 31 December 2020. Similarly, the total current assets grew from $432.202 billion on 31 December 2019 to $533.249 billion on 31 December 2020.

Conversely, Morgan Stanley’s total debt grew from $192.627 billion on 31 December 2019 to $217.079 billion on 31 December 2020.

Is Morgan Stanley a Good Stock?

So yes, Morgan Stanley (MS) added enormous value in 2020. But is it a good stock?

Morgan Stanley is cheaper than Goldman Sachs (NYSE: GS) which was trading at $327.68 on 13 April 2021. Mr. Market paid $79.53 for Morgan Stanley on the same day.

Moreover, Morgan Stanley is a respectable dividend stock. Morgan Stanley paid a 35₵ quarterly dividend on 13 February 2021. Overall, Morgan Stanley offered an LTM (last twelve months) dividend of $1.40 and a dividend yield of 1.73% on 12 April 2021.

In conclusion, I think Morgan Stanley is a cheap value investment in finance that pays a respectable dividend. If you are seeking a cheaper value investment with a lot of growth potential, I think Morgan Stanley is worth a look.