Buy Morgan Stanley, Sell Goldman: JPM Analyst
NEW YORK (TheStreet) -- Morgan Stanley(MS) was upgraded to "overweight" from" neutral," while, Goldman Sachs(GS) was cut to "underweight" from "neutral" in a report published by JPMorgan analyst Kian Abouhossein Tuesday.
Morgan Stanley shares have been among the worst-performing of U.S.-based global banks, losing roughly 1% year to date. Goldman Sachs shares are up nearly 17% year to date, about the same as Financial Select Sector SPDR(XLF) , a popular exchange-traded fund that tracks big U.S. financial stocks.
Abouhossein argues Morgan Stanley has strengthened its balance sheet by several metrics, and has wisely moved to shrink its fixed income currency and commodities franchise in favor of an equities focus. He further contends the shares are cheap on a valuation basis at 7.5 times earnings and 0.5 times net asset value for a return on net asset value, excluding its own debt, of 6.7% versus 2013 estimates.
Morgan Stanley also received an upgrade from CLSA analyst Mike Mayo, CNBC reported, though the CLSA report could not be obtained by TheStreet.
As for Goldman Sachs, Abouhossein writes that the company has "best in class risk management, but appears fully valued" in a "weak revenue environment" for investment banking. The shares are "relatively expensive," he continues, at 8.8 times earnings and 0.8 times net asset value for a return on net asset value, excluding its own debt, of 9.1% versus 2013 estimates.
-- Written by Dan Freed in New York.
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