Stock-Picking Becomes Key Going Forward, Says Morgan Stanley After Presenting a '30 for 2023' List

March 19, 2021 9:16 AM EDT
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Morgan Stanley's research team expects specific factors to become more important going forward, which would place a higher focus on picking the right stocks to buy.

On the fundamental side, the estimates of the bank’s Economic team are higher than the consensus on the economic recovery.

“Strong growth supports a bullish view on equities, but our US Equity Strategy team thinks that strong growth is largely in the price of the major indexes. Hence, they argue that stock picking will be essential for outperformance,” it is said in today’s note.

Based on the belief that quality outperforms in the long run, a team of analysts at Morgan Stanley drafted a list of 30 stocks that are likely to strengthen their sustainable competitive advantage going forward.

“We paid particular attention to RNOA, management’s attitude toward strategy, capital structure, and clarity and consistency of shareholder remuneration (dividends / buybacks). We also examined each stock's scores in our Quant Strategy team’s stock selection model, BEST, which ranks over 1,000 US stocks by their expected market-relative performance on a 24-month horizon, and MOST, the Quant team’s 3-month model.”

"Additionally, we integrated Environmental, Social, and Governance (ESG) factors into our decision process, and assessed key risks and opportunities for each company,” the note adds.

Morgan Stanley reiterates that the following list consists of the best franchises, according to their analysts, and not the most undervalued stocks.

“Our guiding principle was to create a list of companies whose business models and market positions would be increasingly differentiated into 2023.” Following companies have found their place on Morgan Stanley’s “30 for 2023” list.

30 for 2023 List:

  • Alphabet (NASDAQ: GOOGL)
  • Amphenol (NYSE: APH)
  • Ball Corporation (NYSE: BLL)
  • The Blackstone Group (NYSE: BX)
  • Burlington Stores (NASDAQ: BURL)
  • CDW Corporation (NYSE: CDW)
  • Costco Wholesale (NASDAQ: COST)
  • Dollar General (NYSE: DG)
  • EPAM Systems (NYSE: EPAM)
  • Estee Lauder (NYSE: EL)
  • Ferrari (NYSE: RACE)
  • First Republic Bank (NYSE: FRC)
  • Invitation Homes (NYSE; INVH)
  • MasterCard (NYSE: MA)
  • McKesson (NYSE; MCK)
  • Microsoft (NASDAQ: MSFT)
  • Netflix (NASDAQ: NFLX)
  • Nike (NYSE: NKE)
  • Nuance, Communications (NASDAQ: NUAN
  • Progressive (NYSE: PGR)
  • Prologis (NYSE: PLD)
  • S&P Global (NYSE: SPGI)
  • Sherwin-Williams (NYSE: SHW)
  • Thermo Fisher Scientific (NYSE: TMO)
  • Trane Technologies (NYSE: TT)
  • UnitedHealth Group (NYSE: UNH)
  • Visa (NYSE: V)
  • Warner Music Group (NYSE: WMG)
  • Waste Connections (NYSE: WCN)

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