Good teams win, but great teams know when to pounce and when to play it cool. It's an essential element of all true champions, but is something that just won't show up in the box score.
Some people call it a killer instinct, but it's much more than that -- especially when it comes to investing. I consider it a combination of intelligence, passion, foresight and hard work. Knowing the situation, fully understanding the task at hand and executing are the main ingredients.
There's no denying that some of my picks are layups. Those are the ones that no matter how you slice it, you know they will line your pockets with cash. They are the no-brainers.
Then there are other types of picks -- like the one today -- that may give some readers pause on first glance, but shouldn't. They are equally as solid and will help ring the cash register just the same. This is where the killer instinct comes in.
is a great company that has been knocked around unmercifully. Now is the time to pounce!
The stock is off more than 13% so far this year and a crazy 44% in the last year. It closed down $1.04 to end the session at $46.54 on Tuesday. It is well above its 52-week low of $33.56, which it hit in March. However, it is nowhere near its 12-month high-water mark of $90.95 a share Dykstra: Bank on Morgan Stanley for a Win
Morgan Stanley, along with the rest of the investment banks, has been whacked by the mess in the mortgage and credit markets. In a research note this week, Oppenheimer analyst Meredith Whitney cut earnings estimates for the second quarter and fiscal 2008 and 2009 for Morgan Stanley,
. The reason is, in part, related to price changes in credit default swaps. On the surface this may seem troubling, but Whitney has Morgan Stanley listed as 'market perform.'
Furthermore, Morgan Stanley's financial chief Colm Kelleher said that it will take several more quarters to eliminate uncertainty related to credit losses. The firm is also talking to institutional clients about doing deals and raising capital. However, the discussions are not turning into business yet because the market is not receptive at the moment.
This may sound like difficult conditions to achieve a trading win in. However, these problems are not unique to Morgan Stanley, they are widespread in this sector. I like Morgan Stanley because its stock is trading at a discount, and it has $915 billion in cash in the bank. It also has institutional support; nearly 80% of its stock is held by institutions.
The firm has had to make a number of changes though, some of which could impact the bottom line. It said it is keeping its leverage low, which means Morgan Stanley's profitability will have to come from gaining market share. The shop also said it will attempt to grow its global wealth management biz through acquisitions, which is the last leg of its three stage growth plan. It is targeting major U.S. cities as well as India, China and Latin America.
The company's stock appears to be moving in the right direction (upwards) and should put us in prime position to pick up a win. It's important to remember that we don't need Morgan Stanley to make a full return to its past glory overnight. It doesn't need to ride all the way back up to $90 to help us get to where we want to go.
This morning, I will be placing a limit order at $17.60 or better, for 10 January $30 (MSAF) calls. Please note, this next statement is very important to our success. By going all the way out until early next year, this gives us plenty of time to capture a win. As I routinely remind you, if the order is filled, make sure to place a GTC sell order $1.00 above the fill price. Lock and load!
Always Remember: Life is a journey, enjoy the ride!
At the time of publication, Dykstra had no positions in stocks mentioned.
Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."