Sarat Sethi: buy this big bank stock ahead of the earnings season


Wall Street banks are scheduled to report their quarterly results next week. Ahead of earnings, DCLA’s Sarat Sethi says Morgan Stanley (NYSE: MS) is the one in “big banks” to own right now.

The many reasons to own Morgan Stanley right now

Morgan Stanley is down 25% from its high in February that makes it an attractive buy from the valuation perspective. But Sethi has other reasons as well for his recommendation. On CNBC’s “Squawk Box”, he said:

60% of the business for Morgan Stanley is recurring asset management. So, they don’t really have a lot of credit risk out there. They’ll show you the balance sheet is very strong. So, I think the multiple compression is not necessary at this point.

The consensus for per-share earnings stands at $1.80 for Morgan Stanley this quarter. The American multinational has topped estimates consecutively in the previous four quarters.

Bank stocks will likely rebound after the earnings season

In a separate CNBC interview, Anna Han – equity strategist at Wells Fargo, said the mega-cap banks look oversold and the technical indicators suggest a rebound is likely in the near-term.

It’s very historically traditional to see banks not have a great response to earnings in the first five days. But look at a month or longer, I think you will see a give back, particularly in banks that did not do well going into the earning season.

A day earlier, Forbes featured the Morgan Stanley team on its list of Best-in-State financial advisors for 2022.

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