Morgan Stanley & Discover Card

In case you missed it, Morgan Stanley will be officially spinning off Discover in the near future. If you were lucky enough, you may have owned Morgan Stanley (MS) stock by closed today, in which you were rewarded with a share of Discover for each two shares of MS you owned.

Unfortunately, if you don't own any shares of Morgan Stanley, the likelihood of obtaining Discover shares before they hit the open market are slim to none. However, there still remains a plethora of money to be made on both stocks. Recently, Mastercard (MA) reached highs in the $160/share range after issuing its IPO around $45/sh. Although Discover may be priced at a higher premium do to the foreseeable or comparable demand, it likely will enter the NYSE undervalued and be an immediate speculative and euphoria play. Holding Discover for a longer time frame may not be a bad idea either. American Express (AXP) was issued back in the late 1970s around a mere $3. Since, the company stock is valued over $60/share, splitting four times along the way.

Discover has always been emulated because of their innovative ideas for the credit card industry, most notably its cash back rewards program. After Discover and American Express won a landmark case allowing issuance of cards for rival companies, both up-and-coming credit card companies have been able to significantly increase their exposure to the marketplace and subsequently, the number of locations cards can be accepted at.

Discover is not the only strong stock play in this business deal. Morgan Stanley continues to show undervaluation, and like its competitors, MS is showing signs of blossoming soon. Recently, Lehman Bros. posted record profits and significant gains, boosting optimism for Wall Street's investment banks, especially those with limited exposure to the housing (specifically, sub-prime) sector such as MS. Unlike the top-rated investment bank on Wall Street, Goldman Sachs (GS), Morgan Stanley's stock price has yet to experience excessive gains, rendering many to expect a price catch-up shortly. Historically, GS and MS moved simultaneously, but in the past couple years, GS has realized far superior gains.