Some market sectors are cyclical. Others tend to be slow and steady. The financial sector has characteristics of both. It tends to be slow and steady most of the time, but fears hitting the financial sector can lead to big losses quickly.
Investors who can sort through real dangers and find undervalued companies capable of growing their market share can win when the sector shifts back to slow and steady.
One niche of the financial service space is asset management. This space can fare well during trouble in the banking sector. In the space,
Morgan Stanley (MS) has fared well, having pivoted away from investment banking and trading.
The asset manager has traded flat over the last year, and large acquisitions have weighed on earnings, while revenues have dropped as the banking sector has slowed amid rising interest rates. Yet shares trade at just 12 times earnings.
Action to take: Investors may like shares at current prices. The stock pays 4.7 percent, and Morgan Stanley will likely gain market share as investors move towards more established banking firms. Plus, shares have been hit in the short-term by banking fears.
For traders, the September $90 calls, last going for about $4.10, offer mid-to-high double-digit returns in the coming months as shares move past the banking sector.
Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
