Morgan Stanley Selects American Express, Santander As 'Top Investment Ideas'

In a note out Tuesday, Morgan Stanley selected two companies that have moved in opposite directions thus far in 2015 as its two best investment ideas in consumer and specialty finance. The two companies: American Express Company AXP and Santander Consumer USA Holdings Inc SC.

Overall, however, the analysts noted that they are also constructive on consumer finance stocks, which include Discover Financial Services DFS and Ally Financial Inc ALLY, preferring those over mortgage stocks and mREITS.

Morgan Stanley said it is not discouraged by the 14 percent selloff in American Express this year. In fact, it sees the move lower as an opportunity to get in without as much risk overhang, noting that the “perfect storm” of events “effectively eliminated the most significant risks to the stock.” The analysts recommended looking at the stock prior to March 11, which will have both the company’s Investor Day and the results from its stress test.

With “early evidence of wage growth emerging” and “a strong consumer backdrop,” Morgan Stanley said it expects Santander to extend recent gains. The analysts outlined a scenario where Santander has more normalized provisioning going forward – “driven by loan growth and stable credit trends.”