Friday, April 18, 2014
As an investor, I look for consumer discretionary companies that do one thing really well (Krispy Kreme, Starbucks, McDonald's) or financial companies that make money from many different lines of business (TD Ameritrade, Wells Fargo). My investment in TD Ameritrade (AMTD) has been outstanding--up around 90% in about a year--and, fortunately, it happened right after I decided to take much larger stakes in a few companies' stocks as opposed to spreading a little bit of money among several dozen. I mean, if you're not comfortable investing $10,000 into a stock, why "play around" with $400? If it drops, it drops the same % for everybody, and if you happen to hit a double or triple, where are you on a $400 investment compared to an investment of $10,000? Reading the WSJ online article announcing Morgan Stanley's recent surge in income and profits, I noticed that broker-dealers can make money in many different ways. They can underwrite securities. They can open an affiliated wealth management firm. They can trade securities for big profits. And, of course, they earn commissions whenever their customers want to trade, which is often. All along the way, they earn bazillions on unused customer cash, which is largely why I bought so many shares of TD Ameritrade when interest rates were low--as rates rise, AMTD will make more money. Unless they don't. In any case, here are some highlights from the WSJ Online article: Morgan Stanley's net income rose to $1.51 billion from $962 million. On a per-share basis, which reflects the payment of preferred dividends, the firm earned 74 cents, or 68 cents excluding accounting adjustments. Analysts polled by Thomson Reuters had expected adjusted earnings of 59 cents a share. Revenue rose 10% to $8.93 billion. Excluding accounting-related adjustments tied to the firm's own debt prices, revenue increased 4% to $8.8 billion, exceeding analysts' average estimate of $8.52 billion. Not too bad, huh?