Longtime banking analyst Richard Bove of Rochdale Securities has a new favorite stock and he’s not keeping it a secret. Morgan Stanley (MS), he told Bloomberg Television yesterday, is “so cheap right now, it’s overwhelming. It should be bought and bought very aggressively, right now.”
Morgan Stanley, to be sure, has risen 30% this year, but the stock has trailed four of its five biggest peers (Wells Fargo (WFC) is “only” up 25%) for the year to date. And Morgan Stanley seems to elicit the most confusion among investors, who have wildly different estimates of the bank’s exposure to bad debt in Europe.
Even if you’re wary of plowing your money into Morgan Stanley, however, Bove thinks that the rest of the sector is attractive too, claiming that “everything that could go right for these companies is going right at the present time.”
“I know people don’t believe that, but if you look at unit growth, which would be loans, they’re up substantially. If you look at margins,which would be the growth of interest rates, interest rates are going higher so margins are going higher. If you’re looking at non-interest income, that’s going to move higher and the costs are under control.So bank earnings should be very strong all year. I happen to believe strongly they may go away in May, but if you take that out of the picture, I think this will be a very good group to be in all year.”
That said, Bove also expects bank earnings to dip in May.
“In May, there tends to be a tightening by the Federal Reserve. There’s an easing of money supply in September and you’ll see the market react very strongly in October/November to that easing of money supply that occurs seasonally every September.� And you’ll see a tightening that occurs in the spring as the Fed does seasonal tightening. It has a huge effect on banks and on the market overall.”
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