Kamis, 21 Oktober 2021

Big Bank Stock Battle: Morgan Stanley vs. Goldman Sachs

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Investing With Charles

Big Bank Stock Battle: Morgan Stanley vs. Goldman Sachs

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Charles Sizemore,
Co-Editor, Green Zone Fortunes

When someone brings up Goldman Sachs Group Inc. (NYSE: GS) or Morgan Stanley (NYSE: MS), I like to imagine a James Bond villain stroking a cat in a dark boardroom.

But what do these banks do? They’re organized as commercial banks, but most of their revenue doesn’t come from lending.

Today’s Investing With Charles lifts the veil on their business models, and, more importantly, helps you decide if these are stocks worth investing in.

Let’s get into it.

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How Do These Banks Keep the Lights on?

Charles: Morgan Stanley and Goldman Sachs are more transactions-based in the sense that they serve as a prime broker for hedge funds, mutual funds and big institutional investors. These investors are dealing with huge sums of money. They don't go to their E-Trade account when they want to buy or sell something. They ask Goldman or Morgan Stanley to help them execute trades.

These two financial giants also help companies enter the public market, issue bonds and manage their own internal investment arms.

It's quite a bit different than what Citi or Bank of America does.

Research analyst Matt Clark: I want to focus on Goldman and Morgan Stanley’s equity investment arms. These teams handle investing in equity for third parties, big institutional investors, companies and even governments.

Charles: The big boys.

Matt: And they make their money on these trades, based on fees they charge that are typically based on volume. So, if Charles and I run a venture capital company and we want to invest $10 million in ticker ABC as an example, we would go to Goldman Sachs or Morgan Stanley, and we'd say: “Can you execute this deal for us?”

And then they will come back and say: “Yes we can. We are going to charge you X percent of a fee.” And then that's how they make revenue on this particular arm.

Click here to see how that has translated into a lucrative year for both banks, and which stock is the better buy right now.

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To safe profits,

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Charles Sizemore

Co-Editor, Green Zone Fortunes

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