Madison Funds, managed by Madison Asset Management, LLC, released its “Madison Dividend Income Fund” third quarter 2022 investor letter – a copy of which can be downloaded here. For the third quarter, the Madison Dividend Income Fund (Class Y) declined -7.8%, compared to the S&P 500 Index, Russell 1000 Value Index, and Lipper Equity Income peer group declines of -4.9%, -5.6%, -5.8%, respectively. On a year-to-date basis, the Fund declined -16.9%, which outperformed the S&P 500 Index and Russell 1000 Value Index returns of -23.9% and -17.8%, respectively, compared to the Lipper Equity Income peer group return of -16.0%. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, Madison Dividend Income Fund mentioned Morgan Stanley (NYSE:MS) and explained its insights for the company. Founded in 1935, Morgan Stanley (NYSE:MS) is a New York, New York-based multinational investment management and financial services company with a $144.4 billion market capitalization. Morgan Stanley (NYSE:MS) delivered a -13.12% return since the beginning of the year, while its 12-month returns are down by -14.47%. The stock closed at $85.28 per share on November 08, 2022.
Here is what Madison Dividend Income Fund has to say about Morgan Stanley (NYSE:MS) in its Q3 2022 investor letter:
“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.
Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…” (Click here to see the full text)
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Our calculations show that Morgan Stanley (NYSE:MS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Morgan Stanley (NYSE:MS) was in 58 hedge fund portfolios at the end of the second quarter of 2022, compared to 61 funds in the previous quarter. Morgan Stanley (NYSE:MS) delivered a -1.25% return in the past 3 months.
In October 2022, we also shared another hedge fund’s views on Morgan Stanley (NYSE:MS) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.
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Disclosure: None. This article is originally published at Insider Monkey.
