Goldman, Morgan are 'Cheap' — But Should You Play'em?

Goldman Sachs and Morgan Stanley report quarterly earnings this week. What's the story going forward for these financial giants? David Trone of Fox-Pitt offered his insights to CNBC.

Outlook:

First, Trone addressed the massive restructuring being enacted by many financials -- and says that revamping may be inconsequential:

"I don't actually view these guys as having a business model. If you look at Goldman, Morgan over the last 50 years, it changes every 10 [years]," he said. "They are adaptable institutions."

• Who Owns Goldman Sachs?
• Who Owns Morgan Stanley?

And just how does he expect the banks to adapt? "They'll give their plans on the call," he demurred. But, he added, "certainly no credit activity for a few months."

Goldman Sachs reports earnings before the bell Tuesday; Morgan Stanley reports on Wednesday.

Recommendations:

Trone has neutral ratings for both Goldman Sachs and Morgan Stanley. He concedes that the firms are each "beaten down and cheap," but maintains that they'll trade sideways for a few quarters, "nine months or so."

Disclosures:

Neither Trone nor Fox-Pitt hold significant numbers of shares in the two firms discussed, nor are any investment banking services provided by Fox-Pitt to the two firms.

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