Banking & Finance

UBS Has 3 Financial Services Stocks to Buy If New IRA Rules Pass

TD Ameritrade

TD Ameritrade provides securities brokerage services and related technology-based financial services to retail investors, traders and independent registered investment advisors (RIAs) in the United States. Its products and services include:

  • TDAmeritrade.com, a Web platform for self-directed retail investors
  • Trade Architect, a Web-based platform that enables active investors and traders identify opportunities and stay informed
  • thinkorswim, a desktop platform for trading
  • TD Ameritrade Mobile, which allows on-the-go investors and traders to trade and monitor accounts from Web-enabled mobile devices.

The UBS analysts point out that company executives did not appear overly concerned by the recent proposal to implement a fiduciary standard for advisors servicing retirement accounts. Management noted that the rule appears very workable at first glance, with no real negative impact expected to hit the RIA channel, as currently advisors already operate as fiduciaries for clients.

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TD Ameritrade investors are paid a 1.6% dividend. The UBS price target is posted at $40, and the consensus target is $38.13. Shares closed Tuesday at $36.55 apiece.

Morgan Stanley

This white-glove Wall Street firm continues to show tremendous growth, and it is running neck and neck with Goldman Sachs as the bank of choice for high-profile initial public offerings. Trading at a price-to-earnings multiple of 12.43, that seems extremely reasonable given the 2015 expectations for EPS growth of more than 20%. The company also has 539 billion in cash equivalents on its balance sheet, versus $288 billion in total debt.

Morgan Stanley says it will raise its dividend to $0.15 and buy back up to $3.1 billion in stock, after the Federal Reserve signed off on the company’s plan in the first quarter. Morgan Stanley says it will buy back the stock over five quarters, starting this quarter. The company had paid a quarterly dividend of $0.10.

During the company’s recent conference call, management stated that they were prepared for any current changes, and costs could be increased but would be manageable.

Morgan Stanley investors are paid a 1.6% dividend. The UBS price target is $39, and the consensus price objective is posted at $38.86. Shares closed Tuesday’s trading at $37.04.

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While the new proposals are not overly onerous, it is yet another in a huge pile of regulations that Wall Street firms will have to follow and account for costwise.