Morgan Stanley analysts have named their top global stock picks in a volatile market, saying they all look cheap right now. While Morgan Stanley – like other banks – remains cautious on equities, given persistently high inflation, slowing global growth and the Ukraine war, it has identified a number of “critical issues” in a May 11 note. “Let’s keep it simple – the macro backdrop is very tough for stocks. Our European economists are revising their GDP forecasts lower, bringing their estimates lower. their inflation rate is higher and put the ECB up for the first time through July,” said analysts led by Graham Secker, referring to the possibility of a rate hike by the European Central Bank. “At the same time, European bond yields (and spreads) tend to be higher and geopolitical risks remain high,” they added in the note, Europe’s mid-year outlook. Cheap Stocks With such economic conditions, Morgan Stanley prefers stocks with “Best Risk Reward in Europe.” All of the bank’s top picks are up at least 10% above their underlying price targets and have a minimum market cap of $5 billion. The following stocks also appear on the list of EU stocks that are trading “cheap” relative to their peers globally. These include automaker Stellantis, with a potential 41% upside from the bank’s underlying price target, and luxury conglomerate LVMH, with a 49% upside potential. It has also picked eyewear company EssilorLuxottica, giving it a potential 26% gain over its underlying price target, as has renewable energy company Orsted, with 36%, and a building materials producer Build Holcim with 21%. High confidence Morgan Stanley analysts also offer a variety of “high confidence” recommendations, including keeping value out of balance relative to growth stocks – value stocks are considered bearish, while investors expect growth stocks to record strong earnings growth. The bank is also maintaining an overweight stock with ” [and] guaranteed dividends”, such as insurance company Allianz, real estate company British Land and telecommunications company Vodafone.” We also recommend investors focus on stocks offering attractive dividend yields, which we consider a ‘short-term’ strategy amid rising interest rates,” the analysts stated. . When it comes to indices, banks prefer the FTSE 100.” Although the activity is relatively strong [year to date] The index remains one of the cheapest asset classes anywhere,” the analysts noted. The FTSE 100 managed to post a 0.38% gain in April, while many major indexes fell. The S&P 500 is down 8.8% for the month, for example, and the MSCI World index is down more than 7%.
A screen shows Morgan Stanley trading information on the floor of the New York Stock Exchange (NYSE), January 19, 2022.
Brendan McDermid | Reuters
Morgan Stanley Analysts have named their top global stock picks in a volatile market, saying they all look cheap right now.