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Industry giant Morgan Stanley (NYSE:MS) is shaking up its model for income-focused investors, indicating a strategic move towards robust and resilient players. The multinational investment bank told investors Thursday that it added new positions and adjusted weights in its dividend portfolio.
What Happened: Morgan Stanley introduced two new names: mining conglomerate Rio Tinto plc ADR Common Stock (NYSE:RIO) and medical technology business Smith & Nephew plc (NYSE:SNN), while it rung the register on Amgen, Inc (NASDAQ:AMGN) and the iShares MSCI Hong Kong ETF (NYSE:EWH).
Strategist Kevin Demers explained Rio Tinto’s addition was driven by three factors: China’s likely announcement of a stimulus that could bolster commodity demand, Rio Tinto’s best-in-class balance sheet and underappreciated earnings power, and the company’s attractive valuation with a current spot free-cash-flow yield of 9%, according to Seeking Alpha, which originally covered the portfolio changes.
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Smith & Nephew's inclusion is also a result of three main factors: its potential for self-help, recovery of elective procedure volume in the medical sector, and its attractive valuation.
Morgan Stanley’s decision to drop EWH is strategic, opting for Rio Tinto, a company with significant exposure to China. The change could bring potential benefits from any easing by the Chinese government aimed to stimulate the economy, and consequently, a rebound in global economic growth.
Morgan Stanley removed Amgen, citing it could no longer provide a rating on the stock.
The investment bank is increasing weights in TotalEnergies SE (NYSE:TTE) and the WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM), while reducing its weight in Novartis AG (NYSE:NVS).
The portfolio’s new composition suggests a focus on companies with strong balance sheets, resilience during challenging economic periods, and exposure to regions with potential for economic rebound and growth.
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