We’re buying 50 shares of Morgan Stanley (MS) at roughly $74.07 each. Following Tuesday’s trade, the portfolio will own 1,600 shares of MS — increasing its weighting to 4.41% from 4.28%. While we mostly want to stay patient and wait for the market to reach oversold levels before deploying capital, we are staying constructive here because the headwinds associated with higher interest rates as well as oil prices and other commodities have started to abate, which should be positive for stocks. Morgan Stanley has one of the best capital return programs in all the large cap banks. Following the conclusion of the Federal Reserve’s annual stress tests, the bank last week increased its quarterly dividend payment 11% to $0.775 per share. At the current price, Morgan Stanley’s dividend yield is roughly 4.2%, which is more than what you will get on the 10-Year Treasury, which has recently come down dramatically, trading around 2.8% after soaring to 2011 highs of nearly 3.5% three weeks ago. In addition to the dividend boost, the company announced a share repurchase program valued at $20 billion, representing roughly 15% of the bank’s market capitalization. Lastly, we think the valuation is cheap at roughly 10x 2022 earnings per share estimates. While it is likely that estimates will need to be reduced further ahead of and after the company’s second-quarter earnings report, which is scheduled for July 14, we think this undemanding earnings multiple reflects a lot of the downside already. Also, the stock trading at cheap roughly 1.4x estimated book value per share does not reflect the quality of the Morgan Stanley franchise. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
