Wednesday, September 30, 2009

Morgan Stanley Report- 09/30/2009 - Basic Valuations

September 30, 2009

Morgan Stanley
Equity Research New York, NY


Recommendation- Buy
Name of Company: Morgan Stanley
Previous Closing Price: $30.88
52 week range: $6.71 - 33.33
Market Cap: $41.97B
P/E: 21.31x
Dividend Yield: 0.60%
Shares Outstanding: 1,359 (mil)
Price Target: $ 33-35/share

Over the last six months capital markets have been turbulent, especially financial equities. Morgan Stanley has rallied 25.61% over the last 3 months.

EPS (earnings per share):
For Morgan Stanley’s fiscal 2nd quarter of 2009, the company reported a loss on basic EPS of $(1.10)/share. That is 182.7% decrease from one year prior. Additionally, forward EPS for the 3rd quarter is expected to grow by 146.4% to $0.51/share. The jump in forward earnings can be attributed to greater than expected profit margins in the investment banking division. Specifically, the robust growth in margins will stem from trading and advisory work. Additionally, the new joint venture of Morgan Stanley Smith Barney will contribute to profits in the company’s flagging Investment Management Division. All three of their prime revenue generating activities has slumped by a total x% from the year prior period due to the global economy. Hence, the ratio will be the best of the year, but compared with its peers Morgan Stanley looks weak.

P/E ratio:
Currently Morgan Stanley is trading at 21.31x earnings (trailing). This is large premium to pay considering the industry is trading at 22.38x earnings and the S&P 500 is trading at approximately 19.81x earnings. Additionally, when examining GS (41.20x trailing), JPM (48.91x), WFC (30.90x), and BAC (28.34x), Morgan Stanley looks cheap from a valuation standpoint.

Growth Estimates:
MS is projected to grow 784.8% next year, compared to the sector growth of 83.2%, and industry growth estimate of 57.1%. Specifically the company expects to see growth in revenues of 36.23% this quarter and growth of 41.7% in 2010. The growth in revenues will come from a pick-up in Mergers & Acquisitions advisory work and Trading. Additional growth in 2010 will stem from these areas as well as the Morgan Stanley Smith Barney LLC joint venture. Also, expect the company to get the most out of its existing businesses via new leadership (James P. Gorman, CEO).

Six Month Chart

Overall Morgan Stanley receives a buy rating from Analyze Capital LLC (from a pure valuations perspective). The firm’s equity price has suffered over the past two years from economic, financial, and political crises. However, the company has managed to tide the waters and stay relatively competitive with its peers. Some may argue that they are lagging compared to their peers, though MS has lost many assets and its Cash flow shrunk by almost half, the firm continues to look for new business developments as well as maximizing current businesses.

Author: Pat Ambrus
Contributors: Alexander Lê

FX daily update - 9.30.09

Dollar Slips <-- Click here

Looks like I got out of that dollar position on time. Markets seem to be range bound. I feel a great pop coming ahead. Need some more time to review charts and form a thesis.


On a side note:

Today's meeting went well, training is progressing well, and we are half way done with incorporation. Once the newspaper publications go out we will be pretty fully formed and ready to start the next step.


Monday, September 28, 2009

FX trade from 9.18.09 - 9.28.09

Here's an interesting trade I did from 9/18/09 until today. I traded a 10 day time frame . Back on 9/18/09 I was reading charts and most the major pairs seem over extended (ie. the dollar was oversold). I expected a pull back (ie. dollar strength) and to a degree I was correct and captured a small profit. I closed out in order to reassess with today's huge equity jump.

It seems that this temporary dollar strength did coincide with equity weakness. Perhaps a weak dollar and strong equity thesis has still some momentum left in it. Though it would seem today obviously contradicts that. We will just have to wait for a longer time frame for confirmation.

Certainly the upcoming earning season may skew this short dollar/long equity relation as expectations are set way high and firms have cut cost as much as they can already. Im sure come correlation studies would be useful in this situation.

More on this later...


Thursday, September 24, 2009

SPX Daily Market Comment - 9.24.09

If the SPX is indeed in a bullish trend, the bulls should be looking for/fighting at 1030 levels. Though it seems that momentum will be able to to push prices in to the 1020's. This would be at around a 5% correction. Perhaps these would be levels for appropriate for re-entry if people believe that the SPX has legs up to 1100.

Much of the future price movements are going to heavily depend on expectations and earnings. This weak dollar/long commodity play maybe a bit overdone at these levels. For the bigger bears key support levels will be found at around 1000+ and 950+ if 1000+ is broken.

I will be assessing charts at each of the 3 main key levels for bulls and bears to form a better thesis.


PS: congrats on your 1070 call Pat.

Wednesday, September 23, 2009

Excerpt From Pat's Trading Journal - 9.16.09

Today I liquidated my position in Natural Gas. I sold all of my shares in The United
States Natural Gas fund @ $11.69/share. Up $1.98 since I took my position or a gain of
20.39%. My reasons are instinctual. I actually did not look at any charts before I exited.
However, I felt the charts may have clouded my vision and told me ton hold on a bit
longer. Yet, My view on the overall direction of the markets is what drove my decision.

I thoroughly believe in a market correction of 5-10% in equities as well as commodities.
THE USD weakness cannot last forever and is a bit exaggerated. I also track the S&P 500
regularly which is overbought as well. The upper bollinger band (2, 20) has been severely
pierced and the RSI is over 70 indicating a correction is coming. IN addition I did some
research on the call options of the SPX for the next month. It was interesting to see heavy
activity about 6000 calls for 1070, but significantly fewer calls for 1080, 1090, and the big
one 1100. I may be wrong bu the market is ahead of itself.

Hence, I am absolutely sure I will be able to enter into Nat Gas, Crude, and the S&P at
much lower valuations during the next 2 weeks. In the mean time I will explore shorting
some financial stocks. My next play may be to short the XLF. More on that in my next
post. As the Great Warren Buffet says, "You can never loose money taking a profit."

Author: Pat Ambrus


I would like to make a side note that his entry timing was nearly flawless, and his exit was clean. We are currently waiting on a more significant pull back of around 10.5 to assess re-entry points. Overall NGU09 futures have been very volatile which as indeed been reflected in UNG to an extent.


Tuesday, September 22, 2009

Thoughts on Goog and Market movements today - email discussion 9.22.09

Alexander Lê
to Clark, Pat, Kell

show details 9:51 AM (5 hours ago)

Markets opening higher, C up and SGP down. Looks like C is hedging my sgp position decently haha. Looks like it will be an interesting day? Btw did we get a price target on google. This blog here saying 479 resistance; do we concur?


Alexander Lê
Fordham University
Tel: +001 862 432 2793

Group ANLZ
Tel: +001 8624322793(US)
Group ANLZ Facebook Group:

Patrick Ambrus
Alex, I don't see google stopping anytime soon. It still has room on the upsi...

11:25 AM (3 hours ago)
Patrick AmbrusLoading...
11:25 AM (3 hours ago)
Patrick Ambrus
to me, Clark

show details 11:25 AM (3 hours ago)


I don't see google stopping anytime soon. It still has room on the upside. I'd set a price traget of something like $512.00-515. The Fundamentals are very solid. I mean it is trading at 34x forward earnings but that is on par with aapl. Also it is still a growth stock as the company continues to expand its businesses and determine how to make money on the internet. Also, EPS are projected at $21/share for the current year. Analysts predict the stock will grow about another 8.5% this year as industry earnings decline and an estimate of another 15% growth next year. So I would be a buyer even at these levels. Now what we need is an etf where i can play google easier. Markets are interesting today. Early open upside then sell-off, and now maybe a mid day rally if we can sustain volume and momentum. Positive news from Global Markets though.

One Love,


Healthcare ETF's to examine on the bloomy:

Global Healthcare, Pharma and Biotech ETFs
iShares S&P Global Healthcare Sector Index Fund (IXJ)

Broad US Healthcare, Pharma and Biotech ETFs
iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH)
Health Care Select Sector SPDR Fund (XLV)
Vanguard Health Care ETF (VHT)

Foreign Healthcare Sector ETFs
WisdomTree International Health Care Sector Fund (DBR)

Alexander Lê
to Patrick

show details 2:52 PM (0 minutes ago)

Im looking at a chart on spx; my man you might be right on calling a pullback at 1070 + . Downside looks favorable from a technical standpoint. Though given that a bullish trend is indeed in place i only see a pull back to 1030.

Though my thesis on the dollar has not yet unfolded which may coincide with a greater drop in equities if we do see dollar strength.

Friday, September 18, 2009

Daily Forex Market Comments - Sept, 18, 2009

Watch the Dollar closely into next week. Dollar strength is coming and looks like the sterling and Aussie are leading. The EUR is way over extended in these territories.

If this is the case we may see a correction in equities and oil to a significant degree.

Monday, September 14, 2009

Daily Energy Market Commentary - 9/14/09

$75 eh? – The Fundamentals

Not so fast. Unfortunately for oil we have not seen this price feat accomplished since October 14th 2008 when CL1 closed at $78.69/barrel. I am surprised at oils recent price behavior considering the potential for a commodities rally; especially when Gold and Natural gas are starting to take off. WTI Crude’s highest closing price since October 20th 2008 ($74.08) was $73.68 on August 24th 2009. Over this 10-month span oil was practically flat. That is not to say money wasn’t made on the violent swings over the span, but as an asset class, crude has been unreliable.

Looking at a fundamental driver of Crude prices there has been plenty of dollar
weakness. As I am writing this, the USD is trading at nearly a 12month low vs. the Euro €1= $1.4604. The yearly movement in exchange rate is virtually flat. (September 29, 2008 closing €1= $1.46170). What does this tell us about crude? Over the past 12 months it has been paired with the euro/dollar price movement. However, I am starting to see a divergence. Over the last trading week the USD has weakened considerably vs. the EUR yet WTI crude has not strengthened, and instead sold off. Only time will validate this recent move.

If we look at some of the news affecting crude, one could argue oversupply as a
reason for the lack of movement towards the upside. For instance, Petrobras along with Exxon Mobile, Chevron, and RDS have discovered a huge oil well off the coast of Sao Paulo/Rio. This well is predicted to have the capacity of 2 billion barriers of light sweet. It should be fully functional by 2013 if Brazil’s government can find more ways to subsidize Petrobras. Additionally, the Chinese government granted a $30 billion loan through Construction Bank of China (last week) to PetroChina. This loan was primarily for sand-oil exploration in Canada or “to secure natural resources,” according to a spokesperson from PetroChina. Lastly, OPEC has decided oil prices are fine at the current supply. I believe OPEC is hoping to see $80 to $85 a barrel. However, this is wishful thinking in the short-term.

Price Targets and Technical Plays

Where is oil headed? Well for the time being I see it trading as low as $63 and as high as $72. It is a broad range, but it has been notoriously volatile. Also, CL1 seems to be trading within 1.4-1.6 standard deviations from the sample mean (Keep in mind for timing on entries and exits). In addition, do not forget about the possibility of the economy reverting back into recession either. With these considerations, my long-term outlook six months from now, we will see $80/barrel…

“Inflation is coming in 2010”


Authored By: Pat Ambrus
Edited By: Alexander Lê

All Comments and concerns can be forwarded to

Saturday, September 12, 2009

Market Update this Past week - Sept 12, 2009

General Update in no specific order:

Equities started to tank this past Friday, though I still am short term bull. Though I do expect some dollar strength over the next few weeks. Oil seems to be ranging 60- 70. It will be interesting to see how this is affection OPEC profit margins and how they will react to changing supply. Though this past Friday's drop in oil I felt was more related to new oil discovery finds in the South Americas. Perhaps getting some insight on financial statements of big oil players may hint at up coming fundamental changes.

Gold is seeing very interesting moves. Head and shoulder patterns? Strong tech resistance at 1000+? How much more can sentiment push levels on precious metals? CPI PPI number are still tame as ever, this inflation story perhaps is pre-mature (though Im not discrediting it).

In terms of Fund flows we are seeing strong fund flows to US bond markets in August and increased equity fund flows into EUR markets. Interesting we are seeing net out flows from emerging markets... this is all hinting to increased risk aversion. Are market participants getting more skiddish?

In terms of the ever evolving financial landscape the Chinese government is really stepping up their game. Opening up new funds in Switzerland(only denominated in yuan/renembi) and buying up oil assets in the Americas is just the start. Some colleagues of mine are speculating of the renembi being allowed to float in the time frame of 5 years or more. I would have to say against a strong sound financial infrastructure (other than primary markets)in China this could really change balance of economies out there. All in all I don't see America passively standing by and not using its political muscle prevent/slow this scenario from happening.

Speaking of change in Asia, huge political surprises seen in Japan. The win of the DPJ has American politician's shakin in their boots (but not really...). Obviously Japan will not be cutting ties to the US, but perhaps this is an opportunity for them to assert some true political independence in the globalizing arena. I have no doubt that the "being Greenest country" will be a big platform that the DPJ will use to assert themselves. That country could really use some serious restructuring and trade diversification.


If the dollar is leading things I'm sure we will see a pull back by the end back in equities by the end of this week or into next week (Im assuming short term dollar strength). In terms of trend overall short to mid term I'm bullish (1 - 2months). Though longer term technicals are still pretty bearish.

Within the major pairs we are seeing regional differences mainly in the EUR zone though overall most major pairs are inline to see some dollar strength in a 1 - 2 week time frame.

So how does this correlate to energy? Natural gas is still not correlated strong to markets but in the Group's view is experience a bottom. Oil interesting has gone lower this past friday, but overall I am personally still short term bull on oil.

Some colleagues feel a larger correction in equities markets need to be seen before continuing any bullish trends (assuming we are still in one). Doing some back testing a 5%-7% correction would be appropriate.

Monday, September 7, 2009

Smartphone's Fight in 2009 - OS & UI

Google & HTC - Android Era

A good smartphone system will allows power hardwares inside a device get fully used. Android creates possibility for a faster developing of the use of a phone because of the open source system. In fact, we can see consumers' interest are shifting from powerful hardware to easy-to-use OS (operation system) and pretty UI (user interface). HTC is growing pretty fast not only because of the Android system, but also HTC's beautiful UI (user interface) that made for the system. With help from HTC, Android system issued by Google has become more and more popular.

Apple - iPhone Kingdom

Same as HTC, one of the main reasons of iPhone's success is that it has a easy-to-use OS and neat UI. Moreover, Apple's online App Store is definitely the most important reason for iPhone's success. There millions and millions of applications and games on iTunes, that make iPhone a very useful handheld device. Although iPhone does not have the most hardcore hardware set, but these applications make iPhone has a lot more functions than other smartphone. Microsoft, Blackberry, Sony Ericsson are all creating and improving their own online application stores now because of the treat from Apple.

Blackberry - Hold on

Blackberry is doing pretty well in competing with iPhone, since plenty of businessman are still trusting Blackberry as the best cellphone for professional uses. Blackberry is also trying to expand its market by following what Apple did, for example, Blackberry Storm. However, the competing in smartphone market now is tough. Blackberry really should focusing on how to keep their loyal customers, the professional image of Blackberry is definitely a vital point they have to notice.

Nokia - Fight back

Since iPhone and Google phones are gradually taking over the market, and Palm, Samsung, Panasonic, LG are all doing pretty well in the smartphone competition. Nokia as the leader of cellphones for couple decades, has to fight back for it's head position. The problem Nokia is facing right now is really their cellphone systems. Although Microsoft Windows 6.5 is releasing, more Nokia phones are still using their traditional S40 or S60 symbian operation system. This limited the use of Nokias' powerful hardwares. There are news of corporate between Nokia and Linux, and Nokia knows where the problem is. Therefore, if Nokia can have an evolution on its OS, it should be able to keep its market share.

Motorola - Reborn?

Motorola is still getting lost in the smartphone competition, and in fact, it is not doing well even in selling normal cellphones. Motorola has been trying to use some outstanding design to attract costumers, but their design and technology is really not catching up with their competitors. If Motorola cannot have a good call in the smartphone competition, they might even get out the market gradually.

NVIDIA - New Star

Due to the growing interest of GUI (graphical user interface), stronger chip which can be dealing with more graphical computing are needed inside smartphone. As the head of computer GPU (graphical processing unit), NVIDIA is entering the handheld market as well. Corporate with NVIDIA will become as important as embedding a good operation system.

Wednesday, September 2, 2009

Daily Market Comment - September 2, 2009

Just a few thoughts before the FED announcement.

Im basing my thesis of a dollar led thesis. Currently Im seeing a short term dollar strength over the next 2 weeks or so. This definitely leaves rooms for equities to further correct; along with oil as well.

Brief Technical/Macro Fundamental Preview on Equities:

Based of the dollar thesis it seems that post Fed announcement that over the next two weeks 980 support on the SPX will not hold. Evidence supporting this idea is MACD and RSI downward momentum; along with some what bearish volume confirmation.

If 980 support holds on the SPX this is significant bullish pattern confirmation. If this scenario pans outs over the next two weeks we may see side ways trading, especially if FOMC news is already priced in with the prior correction 8/28/09 to 9/01/09.

Overall as my friend Sauros points out that its too dangerous to enter at these levels since many of the past bears during the continued rally are basing this correction of weak fundamentals in the market.

Whats more interesting is the Chinese equity story. Perhaps for another day....
This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.