Join        Login             Stock Quote

Bull Market Buys: Blackrock & Morgan Stanley

 January 31, 2013 03:06 PM

by Mike Cintolo, editor Cabot Top Ten TraderAs the general market has heated up, we've noticed more and more "Bull Market stocks"—brokerage, investment bank and asset management firms, each of which directly benefit from higher stock prices and increased trading activity—pushing to new highs.

Our favorite of the week is BlackRock (BLK), which recently reported a great quarter. It's not going to triple, but after a long rest period the stock is under very strong accumulation. We also recommend Morgan Stanley (MS), another hot-topic to emerge from the financial sector.

[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]


BlackRock might be the granddaddy of the group; the company has an almost unbelievable $3.8 trillion of assets under management! Obviously, that's not mom-and-pop investors, but big institutional pension and hedge funds, as well as some very wealthy individuals.

One big driver is the firm's iShares business, which it purchased in 2009 and has been a big hit; BlackRock's top brass alluded to a secular shift into ETFs and more passive investments, which plays right into iShares' hands.

Best of all, management is committed to returning cash to shareholders—it just hiked the dividend 12%, resulting in an annual yield just south of 3%, and continues to buy back shares quarter after quarter; the company repurchased about 5% of its shares last year, and has authority to buy another 5% going forward.

[Related -Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week]

With sales growth picking up, earnings growth accelerating and the potential for better-than-expected earnings in 2013 if the market continues its winning ways, we think BlackRock has solid upside.

BLK actually peaked back in January 2010 at 244; since that time, earnings have grown quarter after quarter, yet the stock hasn't been able to make any progress.

That looks to be changing now, however—after bottoming last May, the stock tightened up beautifully for a few months, and now it's climbing steadily, punctuated by last week's solid upmove. BLK isn't a runaway-type stock, so we think you can get in on a small pullback in the days ahead.

Morgan Stanley

The company created a firestorm for investors by reporting earnings of 45 cents per share, excluding items, reversing a loss of 20 cents per share last year. Revenue soared 37% to $7.5 billion.

Morgan's Wealth Management unit was the centerpiece of the report, with revenue rising 8% on strong margins and investment banking returns bolstered by initial public offerings and global mergers. Driving wealth management gains was Morgan's steal-of-a-deal to acquire most of Citigroup's Smith Barney brokerage.

And, while trading revenue fell short of expectations, management emphasized a focus on future returns centering on growing consumer strength in the U.S. economy. This optimism should continue to support Morgan Stanley as the firm strives to improve return on equity.

"After a period of turmoil, a period of restructuring, a period of development, we're now pivoting to a period of growth and performance," Morgan CEO James Gorman told Bloomberg TV. After slashing some 6,000 jobs in the past year as part of the restructuring effort, Morgan Stanley is leaner, and more focused on growing its bottom line than ever.

After failing to hold above potential support near 20 in early 2012, MS shares followed the rest of the market lower throughout the summer. Shares found a floor near 12 in June/July, and utilized support in the region to rally back above several key moving averages.

Following a period of consolidation in the 16-18 region, just above its 50-day trendline, MS finally broke out and eclipsed former resistance near 20. The recent earnings report was icing on the cake, sending MS to fresh annual-high territory above 22.

With some consolidation inevitable following last week's spike, we recommend buying on dips to achieve the best entry. A loose stop near 19 would be prudent.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageOversold Airline Ready For A Quick Rebound

Trading countertrend moves can be profitable but risky, so it pays to line up as many factors as possible read on...

article imageWhat Is Your Sell Criteria?

Every stock market cycle has its darlings—the stocks investors believe can do no wrong.  I remember 1999 read on...

article imageUS Employment Growth Continued To Slow In April

Company payrolls increased by a lower-than-expected 171,000 last month, the US Labor Department reports–the read on...

article imageMake America Great Again

Our weekly commentaries provide Euro Pacific Capital's latest thinking on developments in the global read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.