Morgan Stanley said to be good bet

Like most investment firms, Morgan Stanley is not immune to the credit crisis roiling Wall Street, but it has less exposure to the rot in the credit markets than many of its peers, and prospects for its investment banking franchise are strong, according to an analyst Sanford C. Bernstein & Co., says Crain’ s New York Business.
“Morgan Stanley will be the least affected by the current fixed-income market events,” Brad Hintz, worte in an research report last week.
Mr. Hintz, a former Morgan Stanley partner who owns shares in the company, recently upgraded the stock to “outperform” and reckons it’s worth $85 a share, or about 40% more than its current price. Shares closed at $62.37 last week.
The firm’s share price has slipped 14% since mid-July as the investment banking business has slowed drastically.
On the other hand, bond sales and trading generated only a third of Morgan Stanley’s revenues last year, compared with nearly 50% at Lehman Brothers and Bear Stearns, according to Bernstein research.
More specifically, the firm seems to have fewer skeletons — leveraged buyouts and subprime mortgages — in its closet.
If the value of its LBO commitments and mortgages were written down by 75%, profits would fall 16%, versus 24% for Goldman Sachs and 49% for Lehman Brothers, according to CreditSights research.
Better yet, other than the troubled bond and LBO market, Morgan Stanley’s lines of business appear to be faring well.
The firm retains its customary place as one of Wall Street’s top dealers in initial public offerings, a highly profitable activity that continues apace, despite the credit market’s problems.
Later this month, Morgan Stanley will probably post its first quarterly earnings decline since Chief Executive John Mack took the helm two years ago.
Yet, investors who can see past the bad news have a chance to pick up one of Wall Street’s elite firms at a bargain price.