The Wall Street we once knew, where Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) ruled the roost, has been forever altered. Investment banking as it had been practiced for decades disappeared when both companies opted to become bank holding companies, allowing them to open the floodgates of government funding to keep themselves afloat.
While there is some disagreement over the value of mark-to-market accounting, analysts are expecting Morgan Stanley to report some huge losses this week, perhaps in the neighborhood of $4 billion, as a result of such rules. The future looks a little bleak, too; revenue growth is expected to be nonexistent, since the company now focuses on more client-oriented business, such as M&A advice and currency and commodity trading.
That also seems to be the opinion of a number of investors who look at Morgan Stanley's financials and see trouble brewing underneath. Top-rated CAPS All-Star dexion10 sees danger lurking on the balance sheet:
Don't let the smooth taste and smooth talk on CNBC fool you. Morgan Stanley has many off balance sheet vehicles... if the crap they held off balance sheet was a tremendous asset it'd be on the balance sheet so beware... there are well over 40B of assets that are not on Morgan Stanley's balance sheet... additionally Morgan Stanley was aggressive in Asia... oops!
What's hot, what's not
Morgan Stanley is just one of several stocks Google's search activity shows to be drawing more interest lately. Below are a few more hot stocks we've found by watching the giant's search trends, which we then pair up with ratings from the Motley Fool CAPS community. Over the first 20 months of tracking the collective intelligence, the data shows that newly minted five-star stocks offer the best opportunities for investors, while the lowest-rated companies fared the worst. A five-star rating is the highest a company can get in CAPS.
By adding in some performance measures for the past year, we can get a handle on how they're expected to do in the future. Here are a few topping the search engine.
|
Stock
|
CAPS Rating
|
Return on Capital, TTM
|
Long-Term Growth Est.
|
|
Caterpillar (NYSE: CAT)
|
****
|
8.2%
|
11.5%
|
|
MetLife (NYSE: MET)
|
***
|
8.1%
|
11.6%
|
|
Morgan Stanley
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**
|
1.2%*
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11.3%
|
|
National City (NYSE: NCC)
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*
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NM
|
9%
|
|
Procter & Gamble (NYSE: PG)
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*****
|
10.5%
|
10%
|
Sources: Google Finance; Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months. NM = not meaningful.
*Return on equity.
Soul-searching
Compared to the complexities that Morgan Stanley presents, you can't get much simpler than the everyday consumer goods sold by giants like Procter & Gamble and Johnson & Johnson (NYSE: JNJ). From shampoos and toothpaste to detergents and pet food, these products will remain in use on a daily basis, regardless of economic conditions. When analysts talk about a "flight to quality" when bad times hit, they're usually referring to defensive stocks like these market stalwarts.
That's what attracts CAPS member SonicMolson, who feels that people will still use these products no matter what, and that the drop in share price is unwarranted:
Everyday consumer products...there is no justification for such a huge price drop in this stock, their sales will hardly suffer. This stock will climb back up faster than the rest of the market.
Despite earnings that came in below analysts' expectations, insurance provider MetLife says there's little to worry about in the business. "We are big, we are strong and we are trusted," said its CEO, according to The New York Times. "Big carries opportunities -- we have used that to our advantage. We will continue to grow faster than the market." Its size and strength attract CAPS member Greg318, who looks for further growth in the coming years:
Like the majority of the stock in the current market, [MetLife] value has drop dramatically recently.. But [MetLife] is a strong company and management are taking the proper steps to position itself to be a strong insurance company in the coming years. Look for a possible sell off the MetLife P&C division in the coming year, possiblily to the Hartford Insurance Group.
Seek and ye shall find
It takes more than a brief glimpse and a few searches to make buy or sell decisions. So start your own research on these stocks on Motley Fool CAPS, where your opinion can still save the day. While there, you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
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