Financials in general did not do well in the second half of 2010, plagued by regulations, rumors, and world riots. Not to mention, of course, that the largest banks are still losing money. One financial company though is making money, has been somehow stable since the financial meltdown of 2008-2009, and is trading at a mere P/E of 12.25. This company is Morgan Stanley.

I’ve been watching MS for quite a while now, almost buying it when it was trading at a ridiculous $24.70 a month or so ago. Even the price right now is still ridiculously cheap, but unless there is an overall reversal in the trend in the financial sector, then don’t expect this stock to break the $28 level. But when that reversal happens (and it cannot BUT happen), then expect the stock to skyrocket. Here’s why:

MS is a very solid company, and there’s rarely, if ever, bad news coming about this company. The stock goes down only when it’s a week day when ti comes to financials in general, and not because of problems with the Morgan Stanley as a company. In fact for the last while, I’ve been only hearing good news about this company, news that are still not reflected well in the current price tag of the stock. Even when GS lowered the estimate on MS this morning, they clearly stated that MS had a very good year.

The stock is currently trading at the $26 level, I would wait until the stock drops to $25.50 for a good entry point. But for a long term investment, even $27 is a good entry price, after all, if we are to give a fair pricing of this stock (P/E X 20), then we can easily say that $42 is a very fair price. Everyone thinks that next year will be the year for the financials, all of them are beaten to near death, and if that happens, expect your investment with MS to nearly double by the end of 2011 if you buy today.