Morgan Stanley's capital markets business is "still a good business" for the long term, he said, and its retail business, while cyclical, "is a little less volatile. I think this is a good valuation entry point, but you’re going to have to weather some ups and downs to really have a big gain."
Harte said people are afraid to buy financial stocks such as Morgan Stanley, fearing a return of the 2008 financial collapse.
"I look at Morgan Stanley trading at half the tangible book value," he said. "That is implying huge losses and very minimal returns after those losses, and I just don’t think that’s right."
Harte added: "If you look historically at how financials have gotten into trouble solvency-wise, it’s always been liquidity, do you have enough cash to get through the crisis."
Morgan Stanley "and the rest of the large-cap U.S. banks all have enough cash to get through the crisis," he said. "I don’t think the liquidity crisis that caused us so much trouble in 2008 is going to happen here."
Morgan Stanley's capital levels have tripled since 2008 and cash on the balance sheet makes up 22 percent of assets, he said. "It's a very different situation" from 2008, Harte added.
CNBC Data Pages:
Neither Jeffrey Harte nor his company own Morgan Stanley shares but Sandler O'Neill has received compensation for non-investment banking services within the last 12 months.