Morgan Stanley

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The firm's biggest new buy in the last quarter was Morgan Stanley ( MS), the $28 billion investment bank. Financials actually made up a major part of Fisher Investments' new buy list for the first quarter, a fact that may surprise some market watchers. Sfter all, financials haven't exactly been a favored sector of late.

Still, Fisher and company picked up 12.4 million shares of Morgan Stanley in the latest quarter, racking up a $244 million position in the stock.

Morgan Stanley is one of the few financial firms that didn't take the axe to its investment banking business in the wake of the recession, opting to keep investment banking part of the legacy business rather than split it off. That move proved painful during the recession, but it could help MS gain more market share in the years ahead now that the market is less fragmented. Like other peers, MS has been working to diversify its revenue stream, focusing attention on the fees earned by its asset management arm and shifting its trading business from proprietary gains to client service.

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That doesn't mean that there aren't some black clouds overhead; there are. The firm may be regretting its decision to become a bank holding company in back in 2008, now that the increased regulation and capital requirements are hamstringing profitability. And the off-balance sheet liabilities that Morgan still holds could hurt the bank's liquidity if the market turns lower.

Still, margins are improving in 2012 and big financials are still trading at a large discount right now. Fisher is making a bet that it's not justified by the fundamentals.

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