By Vitus Vrynn
In the past I have been extremely bearish when it came to Morgan Stanley (MS), but I also speak often about a turn of the tides. When it comes to the world of preferreds, cash is king, and some of Morgan Stanley's recent decisions imply it has been finding new ways to free up some capital. One of the more intelligent decisions it is making is the consolidation of three of its locations into a central office, which should minimize expenses and also increase general business efficiency.
As far as its leadership goes, James Gorman seems to be getting some positive press regarding his general attitude for the company's future direction. There have been many criticisms aimed at him, myself not with-standing, but he has been able to concede that mistakes have been made. Apparently his direction for the company is to bring it back to a client-focused business model, and I would imagine that such a business model will prove the most successful in the long run.
I cannot speak as for how any of this will play out for Morgan Stanley, but compared to how it has been looking in recent months, these small morsels of good news could lead to bigger things for the firm on the whole. For the moment, I don't recommend any of its preferreds, but as we observe Gorman's decisions, it could change.
One of the other things that I write about frequently is the absolute necessity for these major firms to know their strong suits, know what makes it different, and develop those aspects to either maintain a foothold or gain an edge. As for Wells Fargo (WFC), one of the most successful aspects of its businesses are the wonderful things it does with branding.
Most recently, Wells Fargo is seeing strides in growth with its FiNet (Financial Network) branch, which is quiet unique in the sense that it is the only one of the big financial firms that has this sort of independent branch. It also serves as a platform for Wells Fargo to integrate into the everyday needs of local businesses, which is incredible.
Beyond its continued success with branding and creative growth, Wells Fargo's CEO is also very optimistic about its more mainstream aspects of business. In this case, a positive look at the market at large is indicative of an executive that is not expecting much to apologize for in the near future. I would definitely recommend owning preferred stock in Wells Fargo, as the more I see, the more I have faith in this company. My particular recommendation is in its J series stock (WFC-J).
Citigroup (C) has been seeing very positive results as a company as well, but it seems like shareholders are still looking to see better results. Recently, the executive compensation plan for Citigroup has been overturned by the aforementioned shareholders, and speculators have gone so far as to call it historic. Vikram Pandit, the company's CEO, has insisted on the necessity of such high compensation is to attract the best talent.
All in all, Citigroup has been performing rather well, so this news came as a surprise to me. I, for one, think that the overturn could serve as a herald for the changing of times, and that the astronomical sums executives are raking in might go down to a more reasonable amount across the board and increase overall dividends by a significant amount.
As for the bottom line on Citigroup preferred stocks, they are still highly worthwhile. It has a few good ones out there, but the one I'm looking at for the moment is the J-series preferred (C-J), which has a later call date than its G series.
As for JPMorgan Chase (JPM), it is still functioning at the top of the industry. Under the leadership of Jamie Dimon it has been doing phenomenally well, and it continues to perform. Recently, Dimon spoke of his thoughts on the global economy, which demonstrated his savvy and experience.
With Dimon being the chief operating officer of the number one firm, it is definitely worth recommending the purchase of JPMorgan Chase's preferred stocks. In the past, I have suggested the JPM-I preferred, but I would go ahead and recommend its JFTTL preferred at this point. While the dividend is not quite as high, the call date is not until 2018 as opposed to the JPM-I's 2013 call date, which is rapidly approaching.
As anyone who frequents my articles might know, the Goldman Sachs (GS) is to some extent my go-to because of its phenomenal longevity and resilience. Despite the speculation of how the firm's leadership might (or might not change), I highly recommend its preferred stock because of the sheer unlikeliness of it becoming too shaken to pay out dividends. On top of this, it looks like Goldman Sachs might be looking at a landslide of cash flow from the recent sale of a stake it possesses of the Industrial and Commercial Bank of China, which is supposedly worth $2.5 billion.