• Morgan Stanley suggested that the next equity bear market may already be underway, and it says it sees a deterioration in earnings growth coming in the second half of the year.
• The firm shared ideas about how an imminent downturn will vary from other recent bear periods.

As the equity bull market forges ahead into its ninth year, all types of investors have been busy trying to figure out when it'll all come crashing down.

But if Morgan Stanley is to be believed, the demise of the second-longest bull run in history may be underway. After all, the firm argues, a bear market in stock valuations has already begun.

If that's the case, why aren't people more alarmed? Morgan Stanley says it's because the deterioration of market conditions has been overshadowed by a new tax law that has given corporations a temporary and unsustainable earnings boost.

So the firm expects earnings-per-share growth to slow in the second half of the year as the positive effect wears off.

The chart below shows Morgan Stanley's one-year leading earnings indicator forecasting the downturn. Such a slowdown would mark the end of a good run for companies in the S&P 500 that have enjoyed seven straight quarters of profit expansion.

"We expect both a deterioration in earnings quality and a peak in organic growth in 2018," Mike Wilson, Morgan Stanley's chief US equity strategist, wrote in a client note. "The bear market in valuations has already begun and supports our overall view that the next cyclical bear market in US equities may have already begun, but is being masked by an index price level that has fallen only 12% thanks to the adrenaline shot to EPS from tax."

That's all well and good then, right? Stock bears will get what they've wanted for so long, and the overall market will get the sharp and unforgiving drop it's been bracing for.

Not quite, says Morgan Stanley, which is predicting a bear market that would ultimately be "unsatisfying" for equity naysayers.

The firm argues that the drop will lack the 20-40% pullbacks that have characterized the past three bear periods dating back to 1987.

For context, consider those past three bear markets. The most recent one, which lasted for 517 days from October 2007 to March 2009, saw a whopping 57% plunge in the S&P 500. During the 929-day bear market from March 2000 to October 2002, the benchmark lost 49%. And in a 101-day period from August to December 1987, the index tumbled 34%.

With that in mind, how does Morgan Stanley think this go-around will differ?

"Instead, we are likely to see a rolling bear market across individual stocks and sectors that results in a choppy, range-trading index for years," Wilson said.

You know, like the market we've seen so far in 2018.

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• In a memo to employees, Morgan Stanley chief executive James Gorman announced a big executive shakeup.
• The bank has named Rob Rooney to oversee the US bank's technology efforts, according to a memo reviewed by Business Insider.
• Clare Woodman will take on Rooney's role as head of Europe, Middle East, Africa. 

There's been a big executive shakeup at US investment bank Morgan Stanley.

Rob Rooney will take on a role overseeing the bank's technology efforts, according to a memo reviewed by Business Insider. Rooney previously oversaw technology and served as the firm's head of Europe, Middle East, Africa. He will move to New York in his new seat. 

Clare Woodman, formerly the global chief operating officer for the bank's institutional securities group, is set to replace Rooney's role in EMEA.

Here's the memo:

Given the rapid pace of technological change and the ever increasing importance of technology in both furthering our business leadership and protecting our Firm and our clients, I am grateful that Rob has agreed to make Technology his sole focus. Over the last two years, Rob has overseen Technology while also serving as Head of EMEA, two critical roles. During his time heading our EMEA business, he has helped the Firm navigate the complex Brexit process, and we thank him for that. 

Rooney's sole focus on tech signals the bank is making it a bigger focus, a person familiar with the matter told Business Insider. Rooney will be focusing on "artificial intelligence, automation, cybersecurity and digital," the memo said.

Rooney will report to Gorman, the memo said.

Notably, the New York bank had a killer first quarter. The bank reported adjusted earnings of $1.45 a share, a 45% increase from last year and well ahead of analyst expectations of $1.28 a share.

Particularly striking was the bank's results in fixed-income, a business unit in trading it once left for dead. The bank posted its best results in the unit in three years. In 2015, it took an axe to fixed-income, cutting 25% of its workforce, replacing its leadership, and slashing bonuses.

SEE ALSO: Morgan Stanley's youngest bankers could be getting a 25% pay raise

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• Netflix's investment in original content appears to be paying off more and more in the eyes of consumers, according to research from Morgan Stanley.
• In an annual survey from the firm, respondents have increasingly viewed Netflix as having the "best original programming," compared to premium cable outlets and other streaming services.

Netflix has been making a massive bet on its future for years now, and it's paying off.

This year, the streaming service is expecting to spend an estimated $8 billion on content. An increasing amount of that will go toward original TV shows and movies, which Netflix has been betting heavily on in preparation for a future when other media companies are less willing to license their content. (See Disney's Netflix competitor, which will debut in 2019.)

While it wasn't always clear that Netflix would be able to make the transition from licensing cheap back catalogs to producing its own hits, according to research from Morgan Stanley and AlphaWise, the streaming giant is well on its way.

In a survey of 3,100 US residents this year, the firms found that 39% of respondents viewed Netflix as having the "best original programming," compared to the offerings from premium cable outlets (like HBO) and other streaming services (like Amazon Prime Video and Hulu).

Perhaps more encouraging for Netflix investors is that the company has also increased the share of consumers who think it has the "best original programming" every year since 2014.

Here's the chart that shows Netflix's progress:

Netflix has seen a steady increase in favorability in this particular survey since 2014, when the streaming service was in just its second year of producing original programming.

Netflix released its first original show, "House of Cards," in 2013, and it expects to release around 700 shows and movies this year. 

Further illustrating consumer perception of Netflix's prevalence in the field, over half of Netflix users in the survey cited "good original programming" as their reason for subscribing to Netflix. 

Morgan Stanley also found that Netflix is nearing a mass-market hold of the age 18-29 demographic, as 70% of people in that age group reported using the service. 

SEE ALSO: All 65 of Netflix's notable original shows, ranked from worst to best

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• Autonomous cars could net telecom carriers $1.3 trillion annually, Morgan Stanley estimates.
• It could be a bigger revolution than the smart phone.
• Still, 5G faces a unique set of challenges before it will revolutionize our commutes. 

Back when smartphones were first introduced, mobile data was less than one-tenth of carrier revenue.

Now that smartphones have all but taken over the world, Morgan Stanley is betting that an even bigger disruption will come from the introduction of data-connected autonomous vehicles.

"Our forecasts of AV data consumption imply a revolutionary change for Telco services – much like the arrival of the smart-phone in 2007," a team of analysts said in a report on the intersection of autonomous cars and telecommunications companies published Tuesday.

What's more, selling data for self-driving cars could net carriers $1.3 trillion annually, the bank estimates, saying it would be a "sea change" for their revenue streams.

Of course, much of the connected-car universe can't fully thrive without a full rollout of the hotly anticipated 5G data network, something Sprint says its merger with T-Mobile will help to accelerate.

5G, short for fifth generation, is slated to replace the current 4G LTE network with faster speeds and much less latency. It's designed to support a plethora of devices that have come online — everything from TVs to toasters — since 4G was first rolled out roughly a decade ago, without slowing down due to network crowding in busy populated areas.

Lightning-fast networks are still years away, unfortunately. As Business Insider's Antonio Villas-Boas reported last month, the way carrier infrastructure is handled in the US — through local zoning authorities — creates a tricky landscape for revolutionizing a national infrastructure network. Nevertheless, they will play a key role in the future.

"In a world where there is full autonomy, mobile networks will need to play a crucial role in the ecosystem," Morgan Stanley says. "Vehicle connectivity to mobile networks can address crashes that cannot otherwise be prevented by current technology (using camera and sensors) or vehicle-to-vehicle platforms. In short, network-connected vehicles are not restricted by line-of-sight limitations. Essentially, data on accidents, congestion/traffic jams, road blockages could be transmitted via 5G."

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• Central banks are exploring the usage and creation of digital currencies following a boom in popularity of the likes of bitcoin.
• This week, analysts at Morgan Stanley examined the possible practical uses from central banks for digital currencies.
• Perhaps their most interesting finding was that digital currencies could be used to enable deeper negative interest rates in the next financial crisis.
• Track the price of major cryptocurrencies with Markets Insider.

LONDON — Central banks could use cryptocurrencies to allow them to aggressively cut interest rates in the future, mitigating the impacts of any future financial crisis.

That's according to a new report from Morgan Stanley, which dissects the possible central bank applications for digital currencies in future.

A Morgan Stanley team led by strategist Sheena Shah identified several areas of possible central bank use for crypto, but made clear that their research was "not intended to suggest where we think a digital fiat currency could be implemented or all the reasons why."

Perhaps the most eye-catching potential application is in the area of monetary policy, where Morgan Stanley argues that digital currencies could allow central banks to take interest rates into deeper negative territory than ever before should they need to in the event of a major financial crisis.

During the last crisis, global central banks cut interest rates aggressively to protect consumers and lenders from the worst impacts of that crisis, with a handful of central banks in the likes of Sweden, Denmark, Japan, and the eurozone, plunging rates into negative territory. Negative rates remain in numerous states, although no central bank has cut rates below -0.5%.

Digital currencies could change that, Shah and her team suggest, saying that: "Theoretically, a monetary system that is 100% digital may enable deeper negative rates."

"This appeals to certain central banks," the team continues.

"Freely circulating paper notes and coins (cash) limits the ability of the central banks to force negative deposit rates. A digital version of cash could theoretically allow negative deposit rates to be charged on all money in circulation within any economy."

Such an idea could be a major reassurance for central banks, with UBS Investment Bank arguing late in 2017 that when the next financial crisis hits, rates in major economies could be forced to drop as low as -5% to mitigate its impacts. Using traditional monetary policy tools to do so would be virtually impossible, but the advent of central bank digital currencies may provide an outlet for such a possibility.

Of course, as with any experimental idea, there are potential drawbacks, with Morgan Stanley saying that "deep and long-standing negative rates eventually are problematic for banks."

"Central banks would then have to go direct to currency users to implement monetary policy, reducing leverage in the system significantly and cutting GDP growth."

Central bank interest in the crypto space has increased significantly over the last 18 months or so, with the likes of the Bank of England setting up specifically focused task forces to examine the benefits of digital currencies. In Sweden, the Riksbank is considering the introduction of its own digital currency, the eKrona.

Some central bankers are more sceptical. Last year, for example, Jens Weidmann, the head of Germany's Bundesbank warned that digital currencies like bitcoin have the potential to make financial crises in the future even more devastating.

Weidmann said he believes that central banks will eventually create their own digital currencies to reassure average citizens that such currencies are safe and stable, but in doing so could increase the risk of bank runs in future crises.

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• Dennis Lynch, head of growth investing at Morgan Stanley Investment Management, was the top large-cap portfolio manager of 2017, and his funds have been dominating for years.
• He says he balances two elements while running his team of investors: culture and cognitive diversity.
• Those two core tenets inform some unique managerial techniques employed by Lynch, including personality tests and a reading network.

"There's no right way to do this."

Dennis Lynch establishes this early on when explaining what's led to his enormous success in the investment field.

It's an intriguing — not to mention modest — response to a question that should give him every reason to brag. It also sheds some crucial light on some core tenets of his overall philosophy, and how he runs his team as head of growth investing at Morgan Stanley Investment Management, where he's the lead manager of six funds and directly oversees $27 billion.

What Lynch, 47, means is that there are multiple ways for a portfolio manager to arrive at a well-informed decision. Some people thrive on personal interaction and prefer to load their days with meetings. Others — Lynch included — are more introverted, and prefer to pore over reading materials. He hires people from both extremes, and everywhere in between.

This line of thinking also informs another key element of Lynch's strategy, which also happens to be a word that pops up repeatedly in discussion: temperament. The way he sees it, there's no ideal personality for investing, so he wants to work with all types.

To him, the true key is recognizing and removing a person's biases. If that can be done successfully, aspiring investors of all kinds can be molded into lean, mean stock picking machines.

Part of being a good decision-maker is being self-aware and understanding why you’re making the decisions you are.

"We all have biases," Lynch told Business Insider by phone. "When you’re under pressure, it’s easy to default to your internal programming. But part of being a good decision-maker is being self-aware and understanding why you’re making the decisions you are.

"You can be the smartest person in the world, but you still need to know how to handle volatility," he continued. "Temperament is a really big factor in success or failure."

An awe-inspiring run of investment success

Before we get any deeper into Lynch's approach to building a portfolio and managing a team of investors, it's important to recognize just how successful he's been during his 20-year tenure at Morgan Stanley.

And since Lynch isn't remotely boastful of his market-shattering performance, allow us to do the honors. Here's a look at the wild success he and his team have enjoyed in two of their top funds:

• Morgan Stanley Multi-Cap Growth Trust
  
  • Returned 48% in 2017, the best out of all large-company stock funds tracked by Kiplinger
  • Surged 38% over the 12 months ended March 31, also the best out of all its peers
  • In the 98th percentile or higher for all large-cap mutual funds on a trailing 1-, 3-, and 5-year basis, according to Bloomberg data
  • Up 16% on a year-to-date basis, compared to 1.5% for the S&P 500 total return index
• Morgan Stanley Institutional Growth Portfolio
  • Best-performing large-company stock fund over a trailing 3- and 5-year basis through March 31, according to Kiplinger
  • In the 99th percentile for all large-cap mutual funds on a trailing 1-, 3-, and 5-year basis, Bloomberg data show
  • Up 16% year-to-date

Personality tests and a reading network

Whether it's his open-minded approach to building out a team, or his market-destroying performance, it's clear that Lynch is a unique individual in the world of investing. That becomes increasingly clear the more he outlines his approach, and the further he gets away from traditional money-management principles.

For a prime example of that, look no further than the personality tests he has his employees undergo every couple years. While it's a fun way for Lynch's team to learn more about one another, it's primarily intended to teach his employees about themselves.

"Being aware of peoples’ temperaments and learning styles is important because it does dictate how they should spend their time," said Lynch. "We have a diverse group of people on the team, and our goal is to not have one blueprint for success. We want to collect and identify people, figure out what they do best, and position them to succeed."

His preferred test is the Myer-Briggs Type Indicator, which he's been sold on since it nailed his personality years ago. He's also used the Enneagram of Personality assessment in the past.

"You have to balance the two things: culture and cognitive diversity," said Lynch. "But it’s a fine line, because if you’re too different, you kind of miss that shared set of beliefs that’s also important for a team."

Speaking of team sharing, there's a second unique element of Lynch's leadership that deals with the exchange of ideas. It's what he refers to as a "reading network," or the group of 150 to 200 Morgan Stanley employees that bounce interesting materials off one another.

The network, for which Lynch's growth-investing team serves as master librarian, goes well beyond the usual smattering of sell-side research. It's instead intended to broaden the intellectual horizons and move away from what the investing herd is reading. As Lynch puts it: "Really anything goes."

Hopefully we can anticipate what could become much more important before everyone else does.

Lynch himself abides by this diet of heavy and wildly eclectic reading. When asked what he might be found perusing on an average day, he gives the highly specific example of reading about power law distributions in Scientific American.

In the end, it's all about identifying massive growth opportunities well before they're identified as such. Because, after all, it's tough to beat the market when you're thinking along the exact same lines as competing investors.

"We do try to emphasize edge thinking, or things people are less focused on today," said Lynch. "Hopefully we can anticipate what could become much more important before everyone else does."

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• Morgan Stanley is using a Jeopardy game on Amazon's Alexa to connect with clients.
• The bank told Business Insider its clients will be able to access data and insights from its equity and fixed-income and other content from the bank via Alexa. 

This Wall Street bank wants to use Amazon's Alexa to connect with clients.

"What is Morgan Stanley?"

The New York-based bank said on Monday it would make some of its content and insights available on Amazon's Alexa voice assistant, including a Jeopardy-style game that quizzes users on the language of Wall Street. 

Morgan Stanley clients will also be able to access markets data and insights from its equity and fixed-income unit, as well as information on the firm's culture and what it's like to work there. 

Morgan Stanley's chief US equity strategist and chief information officer for Institutional Securities and Wealth management Mike Wilson said that using voice assistants is a new way for the bank to adapt to how people increasingly consume information. 

The bank is following in JPMorgan's foot steps. The bank in March enabled its clients to use Alexa to access research reports, Bloomberg first reported. 

Morgan Stanley has been putting a greater focus on technology. Notably, Rob Rooney, who previously oversaw the bank's operations in Europe, Middle East, Africa, as well as its efforts in tech, was transitioned to New York to oversee technology exclusively. 

The bank is also investing heavily in digital within its wealth management business. It launched a robo advisor late last year, primarily geared at children of its existing clients. 

The bank reported a killer first quarter with adjusted earnings of $1.45 a share, a 45% increase from last year and well ahead of analyst expectations of $1.28 a share.

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• Morgan Stanley says the easy conditions enjoyed by stock traders over the past several years are rapidly coming to an end.
• The firm provides a specific forecast for when various asset classes will see their cyclical peaks — and spoiler alert, it's coming soon.

The past couple years have been exceedingly easy for investors.

It may not seem that way to traders who have battled on the front lines through rough patches and geopolitical scares, but Morgan Stanley says that once people have the benefit of hindsight, they'll realize just how perfect conditions were.

Let's take an inventory of all the positive forces that support this view: stronger-than-expected economic growth, surprisingly weak inflation, continued monetary accommodation, and positive policy action (in this case, the new tax law).

As Andrew Sheets, Morgan Stanley's chief cross-asset strategist, puts it, "one doesn't usually get all of those things together, and their confluence powered risk assets higher."

But, unfortunately for investors, the firm also says those easy gains are all but over.

Stocks have historically topped nine to 12 months after a trough in credit spreads, according to Morgan Stanley, which says such a bottom was reached in late January or early February. That, in turn, would mean equities are on pace to top around December of this year. The firm also notes 10-year Treasury yields tend to peak roughly three months before stocks, putting their top in September.

Morgan Stanley has responded to its findings by reducing its net long equity exposure to 2%, down from 4%. After all, although he acknowledges it's "risky" to own stocks as they enter the final phase of a market cycle, Sheets doesn't want to miss out on the intermediate-term gains he expects them to generate.

While other pundits across Wall Street haven't issued such a specific timeframe for an equity market top, firms including Goldman Sachs and BlackRock have started highlighting what they see as slowing stock fundamentals.

Of particular concern is plateauing earnings growth. Richard Turnill, global chief investment strategist at BlackRock, said on Monday that "earnings are close to a peak," noting that the new tax law provided a one-time surge in profit estimates that will be impossible to surmount in the near future.

Goldman has similar thoughts. As pointed out by David Kostin, the firm's chief US equity strategist, "analysts do not expect the conditions that led to upside in 1Q EPS to persist for the remainder of the year."

None of this is intended to scare anyone at present time — nor should it stir up immediate worry. The bigger takeaway is that stock investors who have enjoyed such an easy run will now have to work a little harder to make money.

Only time will tell if they're up for the challenge.

SEE ALSO: 'Comfort is not your friend' — The stock market's biggest bear explains why the next market crash will be one of the worst ever

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• Dennis Lynch, head of growth investing at Morgan Stanley Investment Management, was the top large-cap portfolio manager of 2017, and his funds have been dominating for years.
• In an exclusive interview with Business Insider, he shares what's long served as his secret weapon when analyzing companies and industries.

Sometimes being an expert on a topic can be a detriment — at least when large changes are afoot.

This may seem like a surprising statement, but the logic is pretty straightforward: You get so used to one set of circumstances that when the status quo is altered, it can be difficult to recalibrate your point of view.

It's for this reason that so many seemingly entrenched ideas have found themselves uprooted over time, often to the chagrin of those tasked with predicting and avoiding those very shifts.

Dennis Lynch realized this early in what's shaped up to be an immensely successful investment career, and made a move that's informed many of his biggest decisions ever since — he hired a "disruptive change researcher" to insulate his portfolios from this phenomenon.

It was 2004, and the recruit's name was Stan DeLaney, who'd just finished up his MBA at Stanford. Lynch, who serves as head of growth investing at Morgan Stanley Investment Management, where he's lead manager of six funds and directly oversees $27 billion, remembers the inaugural topic he assigned to DeLaney. It was about 15 years ago, when Lynch needed a pair of fresh eyes to analyze the radio industry.

On the surface, radio looked to be fine. Stations were local monopolies with regulatory advantages, and there were plenty of reasons to think revenue would continue to grow going forward. And if you asked executives and analysts, they delivered the same rosy message.

It was DeLaney's express purpose to challenge these comfortable, insulated opinions and recognize elements of change. In this case, that disruptive force was the internet, and you know what happened next — music migrated online, and radio stations became a shell of their old selves.

And Lynch was right on top of it not just because he saw it coming, but because he was willing to challenge conventional thinking around a legacy business. DeLaney still works with Lynch a full 13 years later, having worked his way from associate to managing director — and their partnership is as formidable as ever.

When things start getting disrupted, experts can actually become a liability

"When you spend a lot of your career developing expertise, it then becomes hard for an individual to jettison all they’ve learned and realize they might need to learn a whole new set of ideas or details," Lynch told Business Insider by phone. "When things start getting disrupted, experts can actually become a liability."

The elimination of bias is crucial for beating the market

The use of a disruptive change researcher makes total sense when you consider that one of Lynch's core investment tenets is the elimination of bias. As Lynch told Business Insider for a previous article, part of being a good decision-maker is being self-aware and understanding why you're making certain decisions.

Creating a position in order to challenge these types of biases would seem to be a big step in the right direction. And if Lynch's performance is any indication, it was the right move. Here's a look at the wild success he and his team have enjoyed in two of their top funds:

• Morgan Stanley Multi-Cap Growth Trust
  
  • Returned 48% in 2017, the best out of all large-company stock funds tracked by Kiplinger
  • Surged 38% over the 12 months ended March 31, also the best out of all its peers
  • In the 98th percentile or higher for all large-cap mutual funds on a trailing 1-, 3-, and 5-year basis, according to Bloomberg data
  • Up 16% on a year-to-date basis, compared to 1.5% for the S&P 500 total return index
• Morgan Stanley Institutional Growth Portfolio
  • Best-performing large-company stock fund over a trailing 3- and 5-year basis through March 31, according to Kiplinger
  • In the 99th percentile for all large-cap mutual funds on a trailing 1-, 3-, and 5-year basis, Bloomberg data show
  • Up 16% year-to-date

Disruption as a core investment tenet

Part of understanding what makes Lynch tick as an investor is realizing that he eschews the traditional growth-versus-value model. Sure, he's looking for sustainable long-term growth stories, but he's not keen to limit his universe using such artificial constructs.

Instead, Lynch looks at disruption — and that can mean that a company is either responsible for creating it, or insulated from it. In the end, it serves as the connective tissue between all of his investment ideas.

It’s not always obvious what a cheap price is

And while Lynch wants to buy stocks at attraction valuations, he doesn't subscribe to traditional ideas of what "cheap" is, which once again informs his decision to shun value investing. In order for Lynch to see if a company is attractively priced, long-term growth potential must be considered to an extent not normally reflected by valuation multiples.

"When companies are highly unique and have long-term growth potential, it’s not always obvious what a cheap price is," he said. "Instead of bucketing or thinking about high- or low-growth, our first step is to ask whether a company benefits from disruption, if there’s something permanent about it that will insulate it from disruption, or if the company is vulnerable to it."

He notes that when he first bought Amazon for his Morgan Stanley portfolios, about 13 years ago, the company dealt with the same valuation skepticism that still surrounds it now, roughly 4,500% later.

Ultimately, Lynch's approach makes it so he can comfortably buy and hold stocks with high conviction. And it's his diligence and steadfast approach — largely informed by disruption research — that allows him to sleep easy at night, even during volatile market spells.

"Investing is not a game of perfection — it’s a game of being approximately right," he said. "We’re trying to collect these unique companies and then own them as they grow into much larger businesses."

SEE ALSO: An inside look at how Wall Street’s best stock picker fine-tunes his team to perfection — from personality tests to reading networks

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• Morgan Stanley’s Adam Jonas has cut his price target for Tesla to $291 — below where the stock closed Monday.
• Jonas was previously one of Tesla’s biggest bulls, with a target as high as $376, before production issues began to shift his tone.
• Follow Tesla’s stock price in real-time here.

One of Tesla’s biggest bulls, Morgan Stanley automotive analyst Adam Jonas, is now officially a bear.

The widely followed analyst slashed his price target for shares of the electric automaker to $291 from $376 on Tuesday, bringing his target below Tesla’s trading price for the first time in months.

"While 1Q18 results were broadly in line with consensus expectations (and slightly above our forecasts),we are making material reductions to our earnings estimates to reflect lingering manufacturing issues with the Model 3 - most recently at Fremont final assembly," Jonas told clients Tuesday. 

"It is our view that the challenges in ramping up Model 3 production reflect fundamental issues of vehicle design, manufacturing process, and automation levels that can weigh against the profitability of the vehicle."

In April, Tesla fell short of Model 3 production targets for the first quarter. The company said that total Model 3 production was 9,766 for the quarter and that it delivered 8,180 cars. It hopes to meet its 5,000-a-week Model 3 goal by the end of its second quarter. 

Tesla’s stock price slipped Monday following another autopilot crash, this time in Utah, which the NTSB said it would investigate alongside its other currently open investigation into the fatal crash of a Model X in California in March.

Also on Monday, Tesla said its highest-ranking engineer would take a leave of absence and CEO Elon Musk formally announced the restructuring he had previously hinted about on Tesla’s bizarre first-quarter earnings conference call.

"To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company" Musk said in a company-wide email. 

"As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission. To be clear, we will continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development."

Musk maintains these structural changes should help Tesla achieve profitability this year, but Jonas remains unconvinced.

"We have increased our estimate for Tesla’s capital raising from $2.5bn to $3.0bn, which we continue to expect in 3Q18,” he said. "We see Tesla as trading near fair value with a balanced risk reward,and believe that is subject to extremely high levels of fundamental execution risk, market/funding risk,and a highly volatile share price."

Shares of Tesla have sunk 11% this year. 

Do you work at Tesla or have other information to share? Get in touch with this reporter here. 

SEE ALSO: Google's Waymo is crushing the competition and could be worth $135 billion, UBS says

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• Tech giants are investing more heavily in infrastructure than previously believed, according to Morgan Stanley.
• In a report Tuesday, the firm said it expects cloud capital expenditures to grow 29% year-over-year in 2018. The firm previously thought growth would be closer to 23%. 
• The change is primarily led by giants like Facebook and Amazon who have billions of dollars to spend on data centers and other infrastructural projects.

Major infrastructure investments by tech giants like Facebook and Amazon have led to a surprise bump in 2018 data center spend, according to Morgan Stanley analyst Katy L. Huberty. 

In a report Tuesday, Huberty said that Morgan Stanley expects cloud capital expenditures to grow 29% year over year in 2018, thanks to "continued workload shift to public cloud and easing component constraints." The firm had originally expected 23% growth, but raised its estimate after seeing how companies acted in the first quarter.

This puts growth in the space 13 percentage points higher in 2018 than in 2017, when the space saw just 16% growth.

"We see hyperscale data center investment inflecting above our prior expectations," Huberty wrote.

Among the big spenders are Amazon, Facebook, Google and Microsoft, who together make up 75% of the capital expenditures of the 14 companies tracked by Morgan Stanley its Cloud CapEx Tracker. 

Amazon "continues to invest heavily to expand AWS capabilities and improve data center efficiency," while Facebook also has plans to invest around $15 billion in data centers, servers, network infrastructure and office facilities, according to the report.

"Similarly, both Google and Microsoft highlighted the need to invest aggressively in their data center business," Huberty wrote.

But it's not just giants making investments in cloud. An April Morgan Stanley survey of 100 chief information officers "suggests the percentage of total company workloads residing on the public cloud will increase from 20% today to 44% by 2021," according to the report. 

SEE ALSO: The median employee at Salesforce made $155,284 last year — just 3% what CEO Marc Benioff took home

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• Morgan Stanley's equity strategists have been sounding the alarm on the bull market for months, saying an extended period of volatility and weaker returns may be underway.
• If that's the case, it increases the importance of stock picking.
• Equity strategists across the firm rated companies they believe will deliver the best returns over the next three years.

If "buy and hold" is your strategy, Morgan Stanley has a few stocks for your consideration.

Equity analysts across industries recently published a list of quality stocks viewed as good to hold for a three-year period — through 2021, in this case.

Morgan Stanley's equity strategists have been sounding the alarm on the bull market for months, warning that an extended bear market may already be underway. If that's truly the case, stock picking will be more important to minimize the damage caused by the worst performing parts of the market.

The strategists rated stocks based on their sustainability of competitive advantage, business model, pricing power, cost efficiency, and growth. They didn't simply identify the most undervalued stocks; they also factored in environmental, social, and governance principles to see how companies are running themselves for sustainability in the future.

The list below highlights the top 17 of the 30 stocks they identified, with comments from the analysts who cover the stocks.

SEE ALSO: An investment chief at a trillion-dollar firm has a wake-up call for anyone who's bullish

Accenture

Ticker:ACN

Market Cap: $105.6 billion

Revenue 5-year CAGR (2016-2021 estimates): 9%

EPS 5-year CAGR: 11%

Price Target: $180

Comment: Accenture is a "beneficiary of shift toward digital and cloud adoption," said Brian Essex, an analyst. "Other positive signposts include (1) commentary from CIOs and the channel that digital/cloud projects are growing in size and scope, and (2) data from consulting firms and vendors that services spending is picking up."

Source: Morgan Stanley

Alphabet

Ticker: GOOGL

Market Cap: $105.6 billion

Revenue 5-year CAGR (2016-2021 estimates): 18%

EPS 5-year CAGR: 18%

Price Target: $1,200

Comment: "Investments in cloud/YouTube/hardware are likely to weigh on GOOGL's near-term profitability, upward revisions, and share price outperformance," Brian Nowak said. "That said, we feel that the additional capex/R&D is necessary to take advantage of the large greenfield opportunities ahead (Waymo, Verily,etc.). We are fully supportive of these investments over the long term as they should enable GOOGL to expand its ecosystem and fuel its innovation and monetization drivers."

Source: Morgan Stanley

Dollar General

Ticker:DG

Market Cap: $25.14 billion

Revenue 5-year CAGR (2016-2021 estimates): 8%

EPS 5-year CAGR: 14%

Price Target: $122

Comment: "Management's key priorities remain (i) profitable sales growth, (ii) unit growth opportunities, (iii) enhancing DG's position as a low-cost operator, and (iv) investing in people," Vincent Sinisi said. "With in-progress investments behind these initiatives and a supportive 2018 setup, we continue to see a clear pathway for solid long-term returns."

Source: Morgan Stanley

• If Google-owned YouTube were a standalone company, it would be worth more than IBM, Disney or Comcast, says Morgan Stanley.
• The investment bank says YouTube's new music subscription service represents an opportunity to boost revenue growth.

If Google's YouTube were a standalone company, the world’s dominant video-sharing site would be worth more than big blue-chip companies like General Electric, IBM, PepsiCo or Comcast, and would be roughly the same value as media powerhouse Walt Disney Co., according to investment bank Morgan Stanley.

In a note to investors on Friday, the investment bank concluded that YouTube is worth $160 billion, based on the firm's analysis of its business. Since Google has yet to reveal YouTube’s financial performance, Morgan Stanley's sum-of-the-parts valuation represents only an estimate (the firm put a 7x multiple on its estimated 2019 revenue for YouTube).

But if that figure is even close, it underscores how the website that Google acquired for $1.65 billion in 2006 has grown into one of the most valuable media entities in the world.  And it could become more valuable still. Morgan Stanley said YouTube stands to bank big money from subscription music.

YouTube managers announced this week that they plan to roll out revamped subscription services. The much ignored YouTube Red is dead and from the ashes comes YouTube Music Premium, a $9.99 subscription music service that enables users to watch ad-free videos.

In addition, YouTube has created YouTube Premium, which offers ad-free music videos, offline downloads, and YouTube’s original movies and TV shows for $11.99.

Music rules the roost on YouTube

“YouTube’s new Music and Premium products speak to a growing subscription focus which could lead to 13X higher user monetization,” the bank said in the report.

According to Morgan Stanley data, music is the most common type of content consumed on YouTube, with 36% of users turning to the site for music everyday, compared to 22% watching movies and movie clips and 20% watching TV show clips every day. 

Every 1 million YouTube users who switch to a paid subscription instead of listening to music for free on the site will add 1% more revenue to YouTube's topline, Morgan Stanley estimates. 

Of course, Google has tried its hand at music subscriptions before with little success, compared to streaming-music rivals, Spotify or Apple Music, the sector’s leaders.

But even if YouTube's paid music service doesn't become the No.1 streaming service on the charts, the site is already a massive media entity in its own right. 

A decade ago, some observers thought the giant media conglomerate Viacom, parent company of MTV and Paramount Pictures, would squash the then tiny YouTube in court, after suing the video service for copyright infringement.  Not only did Google-owned YouTube prevail in that landmark case, but — based on the Morgan Stanley estimates — the video site is now worth more than 10 times Viacom's $12 billion market cap.

Here's how YouTube's $160 billion estimated value compares to the market capitalizations of some of the most well-known corporations:

• Google (including YouTube): $742 billion
• Disney: $155.3 billion market cap
• Comcast: $150 billion market cap
• Netflix: $141 billion market cap
• General Electric: $129 billion market cap
• Pepsico: $138.7 billion market cap
• IBM: $132.4 billion market cap
• Spotify: $26.9 billion market cap
• CBS: $19.6 billion market cap
• Viacom: $12 billion market cap

SEE ALSO: YouTube is killing one of the best parts of Google’s music streaming service

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• Morgan Stanley's equity strategists have been sounding the alarm on the bull market for months, saying an extended period of volatility and weaker returns may be underway.
• If that's the case, it increases the importance of stock picking.
• Equity strategists across the firm rated companies they believe will deliver the best returns over the next three years.

If "buy and hold" is your strategy, Morgan Stanley has a few stocks for your consideration.

Equity analysts across industries recently published a list of quality stocks viewed as good to hold for a three-year period — through 2021, in this case.

Morgan Stanley's equity strategists have been sounding the alarm on the bull market for months, warning that an extended bear market may already be underway. If that's truly the case, stock picking will be more important to minimize the damage caused by the worst performing parts of the market.

The strategists rated stocks based on their sustainability of competitive advantage, business model, pricing power, cost efficiency, and growth. They didn't simply identify the most undervalued stocks; they also factored in environmental, social, and governance principles to see how companies are running themselves for sustainability in the future.

The list below highlights the top 17 of the 30 stocks they identified, with comments from the analysts who cover the stocks.

SEE ALSO: An investment chief at a trillion-dollar firm has a wake-up call for anyone who's bullish

Accenture

Ticker:ACN

Market Cap: $105.6 billion

Revenue 5-year CAGR (2016-2021 estimates): 9%

EPS 5-year CAGR: 11%

Price Target: $180

Comment: Accenture is a "beneficiary of shift toward digital and cloud adoption," said Brian Essex, an analyst. "Other positive signposts include (1) commentary from CIOs and the channel that digital/cloud projects are growing in size and scope, and (2) data from consulting firms and vendors that services spending is picking up."

Source: Morgan Stanley

Alphabet

Ticker: GOOGL

Market Cap: $105.6 billion

Revenue 5-year CAGR (2016-2021 estimates): 18%

EPS 5-year CAGR: 18%

Price Target: $1,200

Comment: "Investments in cloud/YouTube/hardware are likely to weigh on GOOGL's near-term profitability, upward revisions, and share price outperformance," Brian Nowak said. "That said, we feel that the additional capex/R&D is necessary to take advantage of the large greenfield opportunities ahead (Waymo, Verily,etc.). We are fully supportive of these investments over the long term as they should enable GOOGL to expand its ecosystem and fuel its innovation and monetization drivers."

Source: Morgan Stanley

Dollar General

Ticker:DG

Market Cap: $25.14 billion

Revenue 5-year CAGR (2016-2021 estimates): 8%

EPS 5-year CAGR: 14%

Price Target: $122

Comment: "Management's key priorities remain (i) profitable sales growth, (ii) unit growth opportunities, (iii) enhancing DG's position as a low-cost operator, and (iv) investing in people," Vincent Sinisi said. "With in-progress investments behind these initiatives and a supportive 2018 setup, we continue to see a clear pathway for solid long-term returns."

Source: Morgan Stanley

• Dennis Lynch, the head of growth investing at Morgan Stanley Investment Management, was the top large-cap portfolio manager of 2017, and his funds have been dominating for years.
• In an exclusive interview with Business Insider, he reveals two companies that recently captured his attention, prompting him to buy them for his funds.

As a fund manager, if you want to outperform both the market and your peers, you have to identify some sleepers.

Sure, you can buy the usual suspects that have seen torrid share expansion in recent years — companies like Amazon, Alphabet, and Facebook— but to truly stand out you have to generate and act upon unique ideas.

It's an approach that has worked for Dennis Lynch, the head of growth investing at Morgan Stanley Investment Management, where he's the lead manager of six funds and directly oversees $27 billion. He has been the top-performing large-cap fund manager on Wall Street in recent years, a feat that would be impossible if he were choosing the same stocks as everyone else.

With that in mind, it's important to note that Lynch's express purpose isn't to beat his peers — or even the market — over a specific period. He's instead laser-focused on building a portfolio of companies that are either disruptive or insulated from disruption.

If those companies perform as Lynch expects by maturing into the industry-altering forces he envisioned, the returns take care of themselves.

So what kind of companies fit the bill? Lynch was kind enough to share with Business Insider two companies that have recently captured his attention to the point where he's added them to portfolios. In fact, one of them was the second-largest holding in multiple funds as of March 31.

But before the big reveal, here's a rundown of the immense success Lynch and his team have enjoyed in two of their top funds:

• Morgan Stanley Multi-Cap Growth Trust
  
  • Returned 48% in 2017, the best of all large-company stock funds tracked by Kiplinger
  • Surged 38% over the 12 months ended March 31, also the best of all its peers
  • In the 98th percentile or higher for all large-cap mutual funds on a trailing one-, three-, and five-year basis, according to Bloomberg data
  • Up 16% on a year-to-date basis through May 17, compared with 2.5% for the S&P 500 total return index over the same period
• Morgan Stanley Institutional Growth Portfolio
  • Best-performing large-company stock fund over a trailing three- and five-year basis through March 31, according to Kiplinger
  • In the 99th percentile for all large-cap mutual funds on a trailing one-, three-, and five-year basis, Bloomberg data shows
  • Up 16% year-to-date through May 17

Without further ado, here are the two recent high-conviction stock picks, with detailed explanations provided for each. All quotes attributable to Lynch.

Veeva Systems

(Note: Veeva was the second-largest holding in both the Morgan Stanley Multi-Cap Growth Trust and the Morgan Stanley Institutional Growth Portfolio as of March 31, according to Bloomberg data.)

"When they came public, Veeva was a dominant provider of customer relationship management (CRM) software for the pharmaceutical industry. They're what people refer to as a vertical SaaS company, which dominates a specific industry, or a niche within one.

"These can be very dominant platforms. Once one company is providing that service to a significant amount of an industry, it can put other players at a disadvantage if they don't adopt it as well. These businesses also tend to be very sticky, with low churn and high renewal rates.

"We believe investors had viewed the company as having strong prospects, but limited to pharmaceuticals and CRM (customer relationship management). In the process of serving their healthcare clients, Veeva developed a product called Vault that helps pharma companies manage complex content and data across various workflows when they are doing pharmaceutical trials. They can track, manage and store all of that information seamlessly on Veeva Vault.

"As it turns out, that kind of product might have much greater potential beyond healthcare, for any companies and industries that have complex data sets that they need to manage and track in regulated environments, such as the chemical industry.

"The Vault product is becoming more of a horizontal SaaS type solution that might have much bigger endgame potential than their initial business.

"We thought investors had been underestimating the potential of Vault for some time. Our conviction got much stronger over the past couple of years."

Shake Shack

"Generally, restaurant and retail can be very challenging to invest in, but Shake Shack has a highly unique culture, brand and value proposition. Danny Meyer is one of the most thoughtful and creative leaders in the restaurant industry.

"Shake Shack's unit economics are also really compelling due to significant recurring usage by its customer base.

"After the IPO a few years back, the stock price went kind of crazy, followed by a long period of significant underperformance.

"We bought Shake Shack on the IPO, but then sold it when its valuation went too high in a relatively short time frame. During the past year when the stock price declined due to general concerns about the restaurant industry, we bought a significant stake in the company as the valuation become compelling again.

"The most important thing for Shake Shack is how their units are opening outside of their core markets. The types of volumes they have been getting are really strong, and at a level that suggests that there could still be significant value creation, despite its high short-term P/E multiple, as the company grows to its endgame or full maturity."

SEE ALSO: An inside look at how Wall Street’s best stock picker fine-tunes his team to perfection — from personality tests to reading networks

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• Netflix is dominating its competition in consumer perception of original programming, according to new research from Morgan Stanley.
• 39% of respondents in a Morgan Stanley survey said that Netflix had the "best original programming"— more than double HBO's second-place tally of 14%.
• The subscriber count for HBO's premium streaming service is surging, however.
• HBO Now is projected to rapidly expand its lead in domestic subscribers among premium OTT services by the end of 2018.

Netflix's original programming is blowing away its competition in the eyes of consumers, but the subscriber count for HBO's streaming service is surging, according to new research from Morgan Stanley and Alphawise. 

Netflix will spend an estimated $8 billion on content this year. An increasing percentage of those funds will go toward the production of original shows and movies (with over 1,000 originals projected this year), as Netflix moves away from licensing content from studios like Disney, which is slated to debut a Netflix competitor in 2019.

And Netflix's massive investment in its "Netflix Originals" appears to be increasingly paying off, as favorability for the service's original programming has grown in each year of Morgan Stanley's annual survey. 

In the firm's 2018 survey, 39% of respondents said Netflix had the "best original programming" among all subscription services, a 6% rise from 33% last year.

Netflix's figure more than doubled HBO, which came in second place this year with 14% of respondents, roughly the same figure it posted in 2017. Amazon Prime (5%), Hulu (4%), Showtime (3%), and Starz (2%) followed. 32% of survey respondents answered "Don't know," while Cinemax, Encore, Epix, and "Other" rounded out the survey with 1% or less each.

Morgan Stanley wrote that the second season of Netflix's "Stranger Things," released in October 2017, was likely the "largest driver" of Netflix's increase in favorability for this year's survey.

The firm also projects a rapid expansion in the reach of HBO's premium streaming service, HBO Now, which is expected to build on its lead among "over-the-top" (OTT) services from traditional media outlets. 

By the end of the year, HBO Now is projected to reach 7 million US subscribers — more than double the 3.1 million subscribers that Showtime and CBS All Access are projected to reach in 2018. 

Overall, HBO's cable and premium subscriptions reached a count of nearly 38 million US subscribers at the end of 2017, while Netflix reached nearly 53 million domestic subscribers, according to Morgan Stanley.

But it's not an "either/or" situation for the two entertainment giants. Morgan Stanley notes that 53% of Netflix subscribers in 2018 are also subscribed to at least one premium network, with many holding an HBO subscription.

HBO Now's rapid growth in 2017 led a massive increase in OTT premium subscribers across all providers. Total OTT premium subscribers hit 10 million last year, which more than doubled 2016's year-end count.

SEE ALSO: All 65 of Netflix's notable original shows, ranked from worst to best

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• Apple could reach a $1 trillion market cap in the next year, Morgan Stanley said Thursday.
• The bank upped its price target to $214 for the stock, citing Apple's hugely successful Services business.
• Follow Apple's stock price in real-time here. 

Morgan Stanley has once again raised its price target for Apple.

The firm's new price target of $214 a share, announced in a note to clients Thursday, would result in a market cap of $1.024 trillion, thanks to a booming services business that could make up for any slump in iPhone sales.

"Services is fast becoming Apple's primary growth driver," analyst Katy Huberty said in the note. "Apple revenue grew at an 8% CAGR over the last five years, driven in large part by sales of its flagship iPhone. But as device replacement cycles extend and device installed base growth slows to single digits, we believe Services will pick up the growth baton and account for ~67% of Apple revenue growth over the next five years."

Apple Services — which includes the App Store and iTunes — has been the quickest growing revenue segment for Apple, adding 270 million customers last quarter alone. That’s over twice as many subscribers as Netflix, and up 100 million from the same period in the previous year.

"We estimate that in the last 12 months, users have spent over $40 billion in the App Store, of which Apple collects a roughly 30% cut, implying the App sore generated slightly more than $12 billion of net revenue for Apple in the last 12 months, up 29% year-over-year," Huberty said.

Shares of Apple are up 9% in 2018 so far.

SEE ALSO: MORGAN STANLEY: Apple's era as an iPhone company is over — but there’s another business that’ll take its place (AAPL)

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• Dennis Lynch, the head of growth investing at Morgan Stanley Investment Management, was the top large-cap portfolio manager of 2017, and his funds have been dominating for years.
• In an exclusive interview with Business Insider, he reveals an epiphany he had early in his career that has informed his decision-making process ever since.

The greatest epiphany of Dennis Lynch's career came while he was on paternity leave.

It was during that time that Lynch — who now serves as head of growth investing at Morgan Stanley Investment Management, where he is the lead manager of six funds and directly oversees $27 billion — was able to detach from many of the short-term trappings of the investment business.

Needless to say, the mental adjustment worked out well for him, considering he's been the top-performing large-cap fund manager on Wall Street in recent years.

Oh, and you may have heard of the stock that inspired him. It was an online bookseller called Amazon, which had developed quite the stigma following the dot-com era.

"It made you sick to your stomach to think about owning it," Lynch told Business Insider by phone. "People were classifying it as a retailer, and most people felt like it was one of the poster children for the internet bubble."

But the new perspective adopted by Lynch allowed him to look past the fresh wounds opened by the dot-com bubble and focus on Amazon's long-term growth potential, which most were still ignoring.

"It dawned on me that there's a whole other way to look at this, based on how the company was run from a long-term perspective, constantly reinvesting profits into bigger ideas and innovation," he said. "There was a whole other way of thinking about it, and that felt like an aha moment."

Now before you go and say you already knew this about Amazon, consider that back then it was not a widely held view. Both the company and the stock may seem like unstoppable juggernauts now, but buying Amazon was a contrarian move at a time, with traders still climbing out of the tech bubble's wreckage.

For evidence of this, look no further than the company's almost 5,000% stock price increase over the past 15 years — 25 times the return generated by the benchmark S&P 500 over the same period. It's safe to say Lynch made a good call.

How Lynch's epiphany informs his management style

The implications of Lynch's Amazon epiphany stretch far beyond his decision to buy any one stock. He has applied the big-picture analysis of potential targets to his entire investment approach — one steeped in seeking out disruption and then acting on it before others.

It also informs how Lynch runs his team of portfolio managers. He knows his grand Amazon realization was possible only because he was disconnected from the traditional groupthink so common in the investment field. And because of that, he implores his employees to take at least one day a month out of the office to brainstorm ideas.

After all, the holy grail for Lynch are the types of potentially paradigm-shifting ideas that make portfolios soar in the long term.

"The idea is for them to shake up their typical daily routine and focus on big ideas and bigger thoughts," Lynch said, adding that, culturally, he thought his aha moment "helped us get to the point where we're leaving time open for thinking and processing."

In the end, it all fits into Lynch's management puzzle, which also includes running team-wide personality tests and maintaining a reading network.

"If you accept that the market is a complex adaptive system, by definition you'll have an evolutionary mindset about how to spend time, find new ideas, and develop differentiated thinking," Lynch added. "You have to be willing to be different, which also means sometimes you have to be willing to lose. It comes back to how important temperament is."

Complete market dominance over a long stretch

Of course, no discussion of Lynch is complete without a thorough dissection of his market-smashing performance over the past several years. Here's a look at the wild success he and his team have enjoyed in two of their top funds:

• Morgan Stanley Multi-Cap Growth Trust
  
  • Returned 48% in 2017, the best of all large-company stock funds tracked by Kiplinger
  • Surged 38% over the 12 months ended March 31, also the best of all its peers
  • In the 98th percentile or higher for all large-cap mutual funds on a trailing one-, three-, and five-year basis, according to Bloomberg data
  • Up 16% on a year-to-date basis through May 17, compared with 2.5% for the S&P 500 total return index over the same period
• Morgan Stanley Institutional Growth Portfolio
  • Best-performing large-company stock fund over a trailing three- and five-year basis through March 31, according to Kiplinger
  • In the 99th percentile for all large-cap mutual funds on a trailing one-, three-, and five-year basis, Bloomberg data shows
  • Up 16% year-to-date through May 17

This is part four of Business Insider's series of stories on Lynch. Read the other three:

An inside look at how Wall Street's best stock picker fine-tunes his team to perfection — from personality tests to reading networks

Wall Street’s best stock picker shares his secret weapon for unlocking massive investment opportunities and crushing the market

Wall Street's top fund manager reveals the last 2 stocks he fell in love with — and breaks down why he expects them to soar

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• A shareholder and long-term employee of Morgan Stanley praised the bank's CEO James Gorman at its annual meeting last week, comparing him to Cleveland Cavaliers' superstar LeBron James.
• Shares of Morgan Stanley have soared 23% in the last 12 months, significantly outperforming shares in close rival Goldman Sachs which have risen 6% during the same period.

Morgan Stanley shareholders have a lot to be happy about right now. Once shunned by Wall Street, the bank has radically changed over the last few years by investing heavily in its steady wealth management business and shedding risky proprietary trading activities to become the darling of the sector. The bank's market value now exceeds that of closest rival Goldman Sachs and has seen its share price soar 23% in the last 12 months, far surpassing Goldman's 6% rise during that same period. 

The man responsible for Morgan Stanley's turnaround? CEO James Gorman, a former McKinsey consultant who took on the job eight years ago and is now drawing some larger than life comparisons from shareholders for his performance leading the bank's transformation. 

During the bank's annual meeting last week in Purchase, New York, Louis Bowman, a former financial adviser at the firm from Richmond, Virginia who said he worked for the bank for 25 years, stood up in front of Morgan Stanley's executive team and board to compare Gorman to Cleveland Cavaliers' superstar LeBron James.

"We all know that LeBron James is probably the most accomplished professional basketball player in recent times. He is certainly a superstar," Bowman said. "Now, several months ago after another good Morgan Stanley earnings release, one of the commentators on CNBC said that you were the LeBron James of Wall Street. Now I'm sure that if I heard it on CNBC it has got to be true. And I just wanted you to know that as a shareholder I'm so glad to be on your team." 

Gorman, in turn, thanked Bowman for his words and said the comparison wasn't totally fair.

"As it relates to LeBron James, he and I share one thing in common and that is the name James. But athletically, that might be the extent of it," he said.  

Morgan Stanley during the first quarter reported a record quarterly profit, including a surprising lift from its bond trading business. 

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• Morgan Stanley is using artificial intelligence to write emails to its wealthy clients when the markets go haywire. 
• Gleaning information from social media and other sources, the emails will include personal information to make them appear like a human wrote them. 

During major market sell-offs, financial advisers have to grind to make sure their clients remain calm and don't sell their stocks in a panic. 

It often requires hours on the phone with clients and blast emails aimed at quelling their anxieties about how a downturn could impact their overall financial picture. As technology continues to transform Wall Street, this handholding has been viewed as one of the safest from automation. 

At Morgan Stanley, however, robots are being used to support human advisers with these types of tasks, said Andy Saperstein, co-head of the New York-based bank's wealth management unit. 

Saperstein, speaking at the Deutsche Bank Global Financial Services conference on Tuesday, said Morgan Stanley is  leveraging artificial intelligence to generate customized emails for its 16,000 financial advisers to send to clients when the markets go berserk. 

In addition to giving the firm's perspective of the market, those emails will show how a major event, like Brexit, might impact a client's overall portfolio.

"It solves a big problem when clients call up really worried," Saperstein said.

The technology is intended to take over rote tasks for financial advisers and free them up to focus on more sophisticated client needs — not to replace flesh and blood advisers, bank executives have said. 

What's striking, however, is that the robots will add their own personal touch to the financial advisers' emails. Gleaning information from a client's social media and other public sources, emails would also be tailored to include personal details to make them appear more human-like. 

"It could say something like "I just noticed that you joined the board of Safe Horizon, wonderful organization, congratulations on that,'" Saperstein said. 

"And it appears that the FA took the time to research the effect that day had on every client in their book specifically, because in essence they did, aided by technology."

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NOW WATCH: BlackRock's $1.8 trillion bond chief shares an epiphany he had that reshaped his entire economic outlook