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Big Bank Stocks To Own

Summary

ValueAct hasn’t taken Morgan Stanley to task, yet.

The thesis is that MS is doing a lot right on its own.

However, is MS really the best bet in big bank activism.

Morgan Stanley (NYSE:MS) getting targeted by ValueAct Capital is a big deal for big bank activism. Bank of America (NYSE:BAC) is still the big name in the cross hairs. Still, the big question remains, can activists really take a big enough stake to move the needle for underperforming bank stocks?

ValueAct has an over $1 billion stake in MS, about 2% of the MS. The fund says it won't push for a board seat, instead, just looking to ride the turnaround success at the bank. However, that isn't as simple for all the biggest banks.

As Evercore has noted about MS, which can be extended to big bank activism in general, "We ... don't see too much of what an activist can do given the dependence on the markets and control the regulators have over things like capital return."

Shares of MS are up 20% over the last three months. Trading at 85% of book value, it's still fairly attractive. As, in terms of brokerage houses, it's one of the cheapest around - compared to the likes of Goldman (NYSE:GS) and Schwab (NYSE:SCHW). Dan Loeb's Third Point showed up in MS during 2013 as it was an undervalued opportunity back then as well. At the time, the big issue at MS was management pay. However, ValueAct has already said it's supportive...


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