Global markets have been rocked by numerous macro-conflicts, but Morgan Stanley sees opportunities for investors to accumulate in “fallen angels” – stocks that the bank believes have sold off significantly and now look attractive. As MSCI Europe fell nearly 14% this year, Morgan Stanley believes European stocks have been resold and the index is now trading below its long-term average forward price-earnings – an important indicator used by traders to assess the value of an asset. But despite conditions of oversold and lower ratings, the bank said it remained cautious about European stocks. “Overall, we see equity estimates as relatively attractive rather than particularly cheap, especially as the basic picture of corporate profits begins to seem rather controversial,” Morgan Stanley strategists, led by Ross MacDonald, said in a research note in May. 24. However, the bank acknowledges that it has pockets of options for its list of “fallen angels”. “We acknowledge that for a number of stocks and sectors, lower results are already extreme. Given this, we believe that investors are likely to sharpen their pencils on individual names, where the risks of recession are beginning to look assessed / risk-reward seems attractive, “said McDonald. “Although we are tactically cautious, we believe that there is a growing appetite on the part of investors to build positions in ‘good companies at a better price’ – stocks in which the recent low performance has created an attractive entry point for patient investors,” he added. . CNBC Pro covers five of Morgan Stanley’s “fallen angels.” Capgemini Morgan Stanley sees French consulting firm Capgemini as a “safe haven” for “attractive” stocks. The bank noted that the company has experience in a relatively defensive position and has performed well during the coronavirus pandemic. Capgemini is also exposed to structural technology topics such as accelerating demand for digital transformation and digital manufacturing / industry 4.0. The bank sees the shares as attractively valued for this growth opportunity and has assigned a target price of 237 euros ($ 254) to the shares. This implies a potential increase of 31.3% compared to the closing price of the shares of 180.5 euros on May 31. Deutsche Post Bank believes e-commerce is a global trend that is “here to stay” – despite normalization in the sector this year and a possible slowdown in consumption. Morgan Stanley noted that Deutsche Post has invested in automating and digitizing its operations, as well as expanding its customer base, all of which have led to growth in both capacity and the target market. The shares also look cheap compared to their counterparts, MacDonald said, with the shares being traded at a discount to their counterparts in the US – a discount of 45% and 10% for UPS and Fedex, respectively. “We find these discounts excessive,” he added. EssilorLuxottica Morgan Stanley believes that the company’s revenue profile is the most sustainable among its counterparts. “In light of market concerns about the vulnerability of consumer sentiment, we see EssilorLuxottica as one of the safest games for consumer investors, given its health-focused revenue profile,” MacDonald said. The bank predicts that the company will achieve a complicated profit growth of five% in five years. This will be mainly due to synergies and product innovations. The bank believes that the company offers a “much higher level of [earnings] visibility “to other consumer and commercial names. LVMH The bank said LVMH remains the” best choice “in a sector that has downgraded since the end of 2021, describing the company as” gaining structural market share “in almost all businesses. In addition, LVMH is the only player exposed to the resumption of luxury trade, the bank added, adding that it remains “optimistic” about the company’s growth prospects and believes it should ” withstands better “than SAP Despite market rotation away from growth and technology stocks, Morgan Stanley said he remains” confident “that SAP can perform” relatively well “in the face of delays, given its periodic revenue mix and offering products that can help companies reduce “SAP offers a combination of high recurring revenue, strong drivers of product demand and market and valuation that is now below previous levels,” for McDonald. He also continues to see a “positive catalyst” in SAP’s cloud business.
Uwe Anspah | photo union Getty Images
Global markets have been rocked by numerous macro-conflicts, but Morgan Stanley sees opportunities for investors to accumulate in “fallen angels” – stocks that the bank believes have sold off significantly and now look attractive.
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