After you receive this alert, we will make the following trades:

  • Sell 135 shares of Morgan Stanley (MS) at or near $86.50. Following the trade, the portfolio will own 1,250 MS shares, roughly 3.0% of the portfolio.
  • Buy 325 shares of Verizon (VZ) at or near $44.75. Following the trade, the portfolio will own 1,625 VZ shares, roughly 2.0% of the portfolio.

We are taking advantage of the outperformance in MS shares, which have climbed almost 20% since mid-June handily beating the S&P 500 over the same period, to modestly ring the register and redeploy some of those gains into the shares of Verizon.

We are using the recent weakness in the VZ stock price to pick up more shares not only for its high dividend yield but also the inelastic nature of its wireless business in today's increasingly connected society.

The catalyst for the trade in Morgan Stanly shares is that outperformance has put them almost at the top of their trading range, near the 200-day moving average. In short, there is resistance ahead and with the IPO market remaining cool as well as year over year comparisons for the M&A market slowing, we'd rather act now than miss the opportunity.

As we do this, we will keep our Two rating intact and trim our price target back to $100 from $105.

Longer-term we continue to like the Morgan Stanley investment banking franchise and recognize we will see a rebound in the IPO and M&A market activity. That eventual return paired with the strategic growth of its fixed fee business is what keeps us bullish on MS over the longer-term.