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Here are Morgan Stanley’s favorite stocks for the next 12 months


If you’re looking for stocks to buy and hold over the next year, Morgan Stanley has compiled their list of favorites. The bank’s “vintage values” list is compiled of names, mostly mid- to large-caps, that Morgan Stanley Research thinks are poised to realize superior risk-adjusted returns over the next 12 months. “The list has a bias toward high-quality stocks; although it screens as more expensive than the market on several multiples-based metrics, it is more attractive on key cash-flow-based valuation measures,” Michelle Weaver wrote in the note Wednesday. To be sure, the average stock in the portfolio is trading at an 11% premium to the market on a forward price-to-earnings basis, and a 17% premium on a price-to-sales basis. “However, Vintage Values 2023 is materially less expensive than the index based on Enterprise Value-to-Operating Cash Flow and carries a more attractive FCF yield (5.0% vs. 4.7% for the market),” said Weaver. In addition, the group is skewed to large-cap stocks and growth. Morgan Stanley sees Amazon as a solid bet going forward, as the company is gaining market share in retail and e-commerce and has a multidecade secular adoption cycle in cloud computing. The company’s high-margin businesses should continue to produce greater profitability while allowing Amazon to invest in growth. Amazon shares are down 18% year to date, but they’ve rallied 28% in the third quarter. The group also sees luxury automaker Ferrari as a winner that should continue to grow through new customers, new segments and geographies. In addition, the company’s move towards electric vehicles is additive to the brand and its margins, according to Bank of America. Other analysts agree – Alliance Bernstein noted that Ferrari is poised to withstand a recession as its one of the top luxury car brands. Ferrari shares are up 11% this quarter but have lost 20% in 2022. Morgan Stanley is one of the biggest bulls on Wall Street when it comes to Palo Alto Networks and sees the company as becoming the first in cybersecurity to reach a $100 billion valuation in the next two years. Following the company’s latest earnings beat, Morgan Stanley noted that it expects the firm to continue to set itself apart from its competition. Drugmaker Eli Lilly is a top pick as it has the most robust new product cycle outlook in Pharma, and will potentially launch five new drugs in the next two years. Those new launches should bring in considerable sales which will help boost the company top line, expand operating margins and lead to share growth. Monster Beverage has strong international growth and a compelling current valuation, Morgan Stanley said. –CNBC’s Michael Bloom contributed to this report.

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