By Vitus Vrynn
Goldman Sachs (GS) seems to be perpetually falling into a rabbit hole, but where it leads to is anything but wonderland. Image can be everything on Wall Street, and it seems that with the exception of its CEO's support of Gay-Rights, it is suffering from a never-ending PR disaster which is continually eroding the solid foundation of a reputation that it has spent over a century establishing.
With Mary Schapiro as the new SEC chairman, it seems that we are getting some backing as investors, however the new guard's stance on such matters drastically damage the credibility of such institutions as Goldman Sachs. According to some sources, Goldman Sachs reps are still selling their products as best as they can, but it seems that such stocks might be front loaded; such reps are attempting to fleece non-premium investors.
Goldman Sachs also might have played a similar role in the 2008 collapse to such firms as Lehman Brothers which is troubling, to say the least. While it is true that it is best for the company to act in a way that is profitable, all the negative press might leave a lasting dent that might even take years to hammer back into shape.
Overall, I am feeling more and more bearish on Goldman Sachs due largely to the parade of horrors surrounding it in the press, and I cannot recommend purchase of its series of preferred stocks at the present.
In an unexpected turn of fate, it seems for the first time in a while that Morgan Stanley (MS) is taking a bold new directions which will allow it to not only save some face, but more importantly, generate capital. For starters, it is now converting its Frontier Emerging Markets Fund into an Open-End Fund, which should provide better yields. As long as stockholders approve the conversion, it should be a very well thought out move for the firm.
It seems that the firm is also making some conscientious decisions regarding investing in a company that is not only profitable, but green as well. The investment will allow a company to provide up to $300 million for residential solar power projects. With such a deep loan, cash flow might see a setback, but as Morgan Stanley has been floundering lately, I think looking into long term gain might be the best approach for the time being, and what better way than using those investment dollars on sustainable energy?
Despite the fact that I really like that Morgan Stanley is developing clients in the green energy market, I would not recommend the purchase of any of its stock as well, considering that we have yet to see how well its market strategy in rebranding and investing in green energy works out in a preliminary sense. Still, it raises eyebrows a bit, and leads me to lean towards, at the very least, less bearish than before.
Moving more into bullish prospects, it is hard to look bearishly on firms that are achieving solid, quantifiable results, and one of the front runners for such accolades is Wells Fargo (WFC).
In terms of volume of mortgage lending, last quarter Wells Fargo amassed an astronomical 33.9% of all mortgage loans. This is not only a sign of loan seekers' trust in the brand, but also in the successful running of the business. Its competitors did not fare so well, like U.S. Bancorp (USB) falling back from third to fifth place in the rankings.
As I have discussed in the past, Wells Fargo is as diverse as it is successful, and it has recently struck deals to more broadly market its financing products within the medical commodities community. It further demonstrates Wells Fargo's ability to aggressively seek out new markets even while it is at the top of its game, instead of resting idly on its laurels.
As for the preferred stocks in Wells Fargo, I can definitely recommend immediate purchase, as Wells Fargo continually seems to earn its worth. I would say the most attractive preferred it offers is its Series J preferred, which does not have a call date until 2017, and is enjoying the high return of around 8%.
Bank of America (BAC) is also facing hard times, but they are making sales, such as Hearst Tower, to generate more revenue. The cool $250 million might be well worth it, however, for a corporate bank which has been struggling. It also made a sale in Boston of office space for over $600 million, which should free up plenty of capital to make some bold moves.
While this is potentially good news for the future of the company, we will have to see some good will efforts made on its part in order for its preferreds to become more attractive. I cannot recommend any preferred stock in Bank of America at the moment.