Investors eager to rack up quick profits might consider recommendations on the Fresh Money Buy List from Morgan Stanley (MS), a concept originated by legendary investment strategist Byron Wien during his years with the firm. This list includes stocks that are expected to outperform the market during the next three to six months. Among them are these eight: Microsoft Corp. (MSFT), Cisco Systems Inc. (CSCO), Walt Disney Co. (DIS), NextEra Energy Inc. (NEE), E*Trade Financial Corp. (ETFC), Knight-Swift Transportation Holdings Inc. (KNX), LyondellBassell Industries NV (LYB) and T-Mobile US Inc. (TMUS).
Morgan Stanley says that their Fresh Money Buy List is "a compilation of some of our best near term risk-reward stock ideas that stand on their own merit." While maintained by the firm's U.S. equity strategy team, it is developed on a bottom-up basis by their equity research analysts. Selections are "based on specific catalysts such as a change in industry fundamentals, a positive EPS surprise, or new product introduction."
The list, which includes 10 stocks in total, is not meant to be a diversified portfolio, or to reflect any sector views or other macro constraints. Annual turnover of 50% to 100% among list members is expected.
Price target $110, or 16% above the March 16 close. Morgan Stanley sees accelerating revenue growth, improving margins, and total returns in the high teens over the next three years. They also say that Microsoft is "emerging as a public cloud winner" with its Azure cloud-computing service. (For more, see also: Apple, Microsoft Will Drive 2018 Tech Earnings Growth: Moody's.)
The price target is $50, 11% above the March 16 close. Morgan Stanley sees the computer networking leader as "Best positioned to provide software/security defined networking (SDN2) solutions to reduce the cost of security breaches."
Target price $130, for a 26% gain. Disney is expected to be a winner in the consumer transition to internet based (over the top, or OTT) video consumption, which is accelerating globally. The company trades at a discount to the S&P 500 Index (SPX), and further growth is expected from Disney's TV networks, parks and films. (For related reading, see also: Disney Is Poised to Break Out on Fox Deal.)
Target price $168, for a 4% gain. "Best-in-class utility coupled with a premier renewable energy business," Morgan Stanley says. They project 6% to 8% EPS growth through 2021, versus 4% to 6% for peers, as well dividend growth of 12% to 14% through at least 2020.
Target price $64, for a 12% gain. E*Trade "offers multiple paths to earnings upside, has a valuation discount to the market and peers that looks compelling, and offers strategic optionality protection," per Morgan Stanley. Elaborating on the last comment, they say, "The board of ETFC has stated its intention to meet certain growth objectives or to seek strategic alternatives for the company, and we believe there could be value in the business for hypothetical acquirers, should that time come."
Target price $60, for a 21% gain. Morgan Stanley sees favorable cyclical trends in the trucking industry and believes that management has been "deeply conservative" in its synergy targets related to the 2017 merger of Knight Transportation and Swift Transportation.
Target price $130, for a 21% gain. The London-based chemical and plastics maker is attractively valued at a forward P/E ratio of only 10, while Morgan Stanley believes that EPS estimates for 2018 are too bearish, with the consensus $2 to $3 below what they project. Their bull case is for $180, a 68% gain, driven by an up cycle for LyondellBassell's products, plus market recognition of its financial strength, with ample free cash flow and low leverage.
Price target $74, for a 14% gain. According to Morgan Stanley, T-Mobile US has been rapidly gaining market share since 2013, and "This growth came as the company reshaped itself as the Un-carrier, determined to solve the industry's pain points (overage charges, international roaming, inflexible device upgrades, etc.)." Moreover, they expect the company "to generate significant free cash flow (FCF) over the next several years" and to "significantly expand margins given a high degree of operating leverage." As a result, Morgan Stanley anticipates large returns of capital to investors, mainly through share repurchases.