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  • Morgan Stanley’s equity strategists have been sounding the alarm on the bull market, saying an extended period of volatility and weaker returns may be underway.
  • If that’s the case, it increases the importance of stock picking to be invested in parts of the market that stay afloat. 
  • 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 you’d want to consider. 

Equity analysts across industries recently published a list of quality stocks that are 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 a number of months now, 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 that’s 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 (ESG) principles to see how companies are running themselves today to be sustainable 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,” said Brian Nowak. “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,” said Vincent Sinisi. “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

See the rest of the story at Business Insider


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