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Rotate Out Of Goldman And Into Morgan Stanley?

Tuesday, 20 Apr 2010 | 6:26 PM ET

If you’re looking to make a bullish bet on investment banking, should you simply rotate money out of tainted Goldman and into rival Morgan Stanley?

After all aren't they basically the same bet, with Morgan having much less litigation risk?

According to Douglas Sipkin of Ticonderoga Securities, that's not the case. Not at all.

He says although the two rivals are perceived as inter-changeable by some investors, they’re actually not.

Here are a few of the many differences Sipkin says you should know about:
- Morgan Stanley's earnings will likely not be as strong as other banks
- Commercial real estate is a lingering issue for Morgan Stanley
- Morgan Stanley faces higher compensation costs than Goldman.
- Morgan Stanley's fixed income business can't compete with Goldman's
- Goldman has a better trading operation than Morgan Stanley
Source: Ticonderoga Securities

Despite the headwinds, Sipkin thinks Goldman remains the better play.

He suggests this pullback is an opportunity; he also reiterated his ‘Buy on Goldman Sachs and raised estimates.

That’s right Sipkin raised his estimates, he sees 28% upside from here.

”The more this becomes an industry issue – as opposed to a Goldman issue – the less bad it will be for Goldman on a relative basis. If this is the tip of the iceberg for the industry it will be a positive for Goldman," he concludes.

*In case you're wondering, Sipkin tells us Goldman is his second favorite name in the entire space. What's his top pick? Watch the video and find out now!



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