Morgan Stanley: Buy these 32 stocks with plenty of cash and high earnings growth potential heading into a volatile 2024
- Morgan Stanley’s Michael Wilson thinks the latest market exuberance is well-founded.
- But he cautioned that 2024 will be a stock-picker’s market, and to be smart about your investments.
- He found 32 stocks with strong earnings growth and FCF yield to invest in before 2024 begins.
What a year 2023 turned out to be — and what a year 2024 could become.
Geopolitical conflict, a contentious presidential election, and inflation that remains above the Fed’s 2% target could all derail the Santa Claus rally carrying stocks into the new year.
But investors aren’t interested in hearing that. They’re far too excited about the Fed’s forthcoming monetary policy pivot, as telegraphed by Jerome Powell at his latest press conference.
Morgan Stanley CIO Michael Wilson is well aware of the euphoria gripping markets at the moment and believes the Fed has good reason for cutting rates sooner than expected.
“Inflation appears to be falling in line with the Fed’s forecast and, based on some of the micro data we are picking up, inflation is even lower than the headline statistics,” he wrote in a recent note to clients.
Of course, he acknowledged that it could end up being too much too soon. The Fed is in a difficult position: waiting too long to cut rates might bring about the much-anticipated recession Wall Street warned of at the beginning of 2023, but cutting early could allow inflation to ramp up once again.
“However, with the Fed’s balance of risks tilting toward slowing growth from inflation, this shift is welcome news to equity investors, especially given the bond market’s reaction to the dovish guidance—i.e., inflation breakevens have remained well behaved and bond yields have fallen further as more rate cuts get priced into the market,” Wilson wrote. “In other words, the markets seem of the view that the Fed isn’t making a policy mistake.”
With hope rising but inflation staying above the Fed’s target range, Wilson believes 2024 will be a stock-picker’s market. To help you pick the right stocks, he searched through the 1000 largest US stocks by market cap for stocks in the top 20% by free cash flow yield, the top 20% by EPS growth, and those with overweight ratings from Morgan Stanley analysts.
The 32 stocks he found are below, along with each company’s ticker, sector, industry group, and market cap.
1. Comcast
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Ticker: CMCSA
Sector: Communication Services
Industry Group: Media & Entertainment
Market Cap: $168.6 billion
Source: Morgan Stanley
2. Match Group
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Ticker: MTCH
Sector: Communication Services
Industry Group: Media & Entertainment
Market Cap: $8.8 billion
Source: Morgan Stanley
3. Live Nation Entertainment
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Ticker: LYV
Sector: Communication Services
Industry Group: Media & Entertainment
Market Cap: $19.2 billion
Source: Morgan Stanley
4. Verizon Communications
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Ticker: VZ
Sector: Communication Services
Industry Group: Telecommunication Services
Market Cap: $161.1 billion
Source: Morgan Stanley
5. BorgWarner
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Ticker: BWA
Sector: Consumer Discretionary
Industry Group: Automobiles & Components
Market Cap: $7.9 billion
Source: Morgan Stanley
6. US Foods
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Ticker: USFD
Sector: Consumer Staples
Industry Group: Consumer Staples Distribution & Retail
Market Cap: $10.8 billion
Source: Morgan Stanley
7. EQT Corp.
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Ticker: EQT
Sector: Energy
Industry Group: Energy
Market Cap: $16.4 billion
Source: Morgan Stanley
8. Valero Energy
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Ticker: VLO
Sector: Energy
Industry Group: Energy
Market Cap: $42.7 billion
Source: Morgan Stanley
9. EnLink Midstream
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Ticker: ENLC
Sector: Energy
Industry Group: Energy
Market Cap: $6.3 billion
Source: Morgan Stanley
10. Cheniere Energy
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Ticker: LNG
Sector: Energy
Industry Group: Energy
Market Cap: $43.4 billion
Source: Morgan Stanley
11. Marathon Petroleum
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12. Cardinal Health
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Ticker: CAH
Sector: Health Care
Industry Group: Health Care Equipment & Services
Market Cap: $26.4 billion
Source: Morgan Stanley
13. McKesson Corp.
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Ticker: MCK
Sector: Health Care
Industry Group: Health Care Equipment & Services
Market Cap: $62.6 billion
Source: Morgan Stanley
14. CVS Health Corp.
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Ticker: CVS
Sector: Health Care
Industry Group: Health Care Equipment & Services
Market Cap: $87.4 billion
Source: Morgan Stanley
15. United Therapeutics
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Ticker: UTHR
Sector: Health Care
Industry Group: Pharmaceuticals, Biotechnology & Life Sciences
Market Cap: $11.3 billion
Source: Morgan Stanley
16. Halozyme Therapeutics
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Ticker: HALO
Sector: Health Care
Industry Group: Pharmaceuticals, Biotechnology & Life Sciences
Market Cap: $5.1 billion
Source: Morgan Stanley
17. Curtiss-Wright Corp.
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Ticker: CW
Sector: Industrials
Industry Group: Capital Goods
Market Cap: $8.2 billion
Source: Morgan Stanley
18. Delta Airlines
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Ticker: DAL
Sector: Industrials
Industry Group: Transportation
Market Cap: $23.7 billion
Source: Morgan Stanley
19. United Airlines
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Ticker: UAL
Sector: Industrials
Industry Group: Transportation
Market Cap: $12.9 billion
Source: Morgan Stanley
20. Analog Devices
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Ticker: ADI
Sector: Information Technology
Industry Group: Semiconductors & Semiconductor Equipment
Market Cap: $91 billion
Source: Morgan Stanley
21. Microchip Technology
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Ticker: MCHP
Sector: Information Technology
Industry Group: Semiconductors & Semiconductor Equipment
Market Cap: $45.1 billion
Source: Morgan Stanley
22. Gen Digital
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Ticker: GEN
Sector: Information Technology
Industry Group: Software & Services
Market Cap: $14.1 billion
Source: Morgan Stanley
23. Fortinet
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Ticker: FTNT
Sector: Information Technology
Industry Group: Software & Services
Market Cap: $40.4 billion
Source: Morgan Stanley
24. Pure Storage
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Ticker: PSTG
Sector: Information Technology
Industry Group: Technology Hardware & Equipment
Market Cap: $10.4 billion
Source: Morgan Stanley
25. UDR Inc.
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Ticker: UDR
Sector: Real Estate Equity
Industry Group: Real Estate Investment Trusts (REITs)
Market Cap: $10.9 billion
Source: Morgan Stanley
26. Gaming & Leisure Properties
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Ticker: GLPI
Sector: Real Estate Equity
Industry Group: Real Estate Investment Trusts (REITs)
Market Cap: $12.5 billion
Source: Morgan Stanley
27. Simon Property Group
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Ticker: SPG
Sector: Real Estate Equity
Industry Group: Real Estate Investment Trusts (REITs)
Market Cap: $40.7 billion
Source: Morgan Stanley
28. Atmos Energy Corp.
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Ticker: ATO
Sector: Utilities
Industry Group: Utilities
Market Cap: $16.9 billion
Source: Morgan Stanley
29. NextEra Energy
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Ticker: NEE
Sector: Utilities
Industry Group: Utilities
Market Cap: $120 billion
Source: Morgan Stanley
30. PPL Corp.
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Ticker: PPL
Sector: Utilities
Industry Group: Utilities
Market Cap: $19.3 billion
Source: Morgan Stanley
31. Public Service Enterprise Group
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Ticker: PEG
Sector: Utilities
Industry Group: Utilities
Market Cap: $31.1 billion
Source: Morgan Stanley
32. Vistra Corp.
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Ticker: VST
Sector: Utilities
Industry Group: Utilities
Market Cap: $12.7 billion
Source: Morgan Stanley
Source: businessinsider.com
