Who knows what the future will bring? But in an increasingly uncertain economic situation, you have to be prepared. That’s why it makes sense to focus on stocks with the strongest long-term potential. Here we turn to a recent report from Morgan Stanley that highlights some of the most compelling longer-term stock picks. The firm examined the enduring competitive advantages of stocks in its coverage, using a wide range of criteria like competitive advantage, business model, pricing power, cost efficiency, and growth. These are 7 of the top stocks to make the cut. Let’s dive in now:
1. Anthem Inc (ANTM– Research Report)
- Street consensus: Strong Buy
- Average analyst price target: $355 (24% upside potential)
US health insurance company Anthem Inc is set to deliver an extremely impressive 19% Earnings per Share Growth CAGR through 2016 to 2021.
The company is the largest for-profit managed health care company in the Blue Cross and Blue Shield Association.
“At its recent investor day, management outlined growth of 12-15% annually, driven by an improving core business and development of assets beyond the core, such as its PBM [pharmacy benefits manager], that can enable entry into new markets,” Morgan Stanley’s Zack Sopcak said. He has a $391 price target on the stock (36% upside potential). See what other Top Analysts are saying about ANTM.
2. Alphabet (GOOGL– Research Report)
- Street consensus: Strong Buy
- Average analyst price target: $1,350 (14% upside potential)
It’s far from the end of the road for Alphabet. According to Morgan Stanley this tech giant is primed to keep outperforming for years to come. “GOOGL’s ability to continue to innovate to grow its 20-year old, $40bn+ annualized desktop search business is impressive, but we are most encouraged by the strength of YouTube, which is showing strong contribution from branded advertising and a growing base of direct response advertising as well,” revealed analyst Brian Nowack.
The analyst is notably more bullish than consensus, and sees prices climbing 27% from current levels to $1,500. See what other Top Analysts are saying about GOOGL.
3. Progressive (PGR– Research Report)
- Street consensus: Moderate Buy
- Average analyst price target: $78 (6% upside potential)
US insurance company Progressive is one of the US’s largest providers of car insurance. “PGR’s low-cost direct distribution model has propelled its market share from 3% to 10% over the last two decades,” explained analyst Kai Pan. “Over the next few years, we expect its industry-leading growth to continue.” Indeed the firm is expecting EPS Growth CAGR (’16-’21e) to come in at a roaring +32%.
As for share price, Pan has an $84 price target on the stock (15% upside potential). That’s with shares already surging 21% year-to-date. See what other Top Analysts are saying about PGR.
4. McDonald’s (MCD– Research Report)
- Street consensus: Moderate Buy
- Average analyst price target: $198 (6% upside potential)
Fast food giant McDonald’s is planning to spend $1 billion in 2019 alone on renovating about 2,000 US locations. That’s following a massive $1.4 billion investment in 2018. “McDonald’s has shifted its business model to a nearly all-franchised one in recent years … This has improved the quality of income by swapping company-operated profits for richer streams of rent and royalties,” wrote analyst John Glass. His $210 price target suggests shares can rise 12% from current levels. See what other Top Analysts are saying about MCD.
5. Estee Lauder (EL– Research Report)
- Street consensus: Moderate Buy
- Average analyst price target: $159 (2% downside potential)
Estee Lauder owns multiple well-known brands, including MAC Cosmetics, Bobbi Brown and Clinique. The stock may have a Moderate Buy consensus from the Street, but if we focus in on only best-performing analysts, the consensus shifts to a more bullish Strong Buy.
“The global middle class is expected to expand 50% by 2028 and increasingly aspires to prestige brands,” commented analyst Dara Mohsenian. “We view premiumization as a sustainable trend as consumers are seeking the high level of service offered by prestige brands, and younger consumers are more focused on beauty, influenced by social media.” The analyst has a $178 price target on the stock, for upside potential of 10%. See what other Top Analysts are saying about EL.
6. Visa (V– Research Report)
- Street consensus: Strong Buy
- Average analyst price target: $162 (5% upside potential)
Despite increasing competition in the payments space, Visa has little to fear according to Morgan Stanley. “We view the threat of disruption from new entrants like device manufacturers and social/commerce networks as fairly low,” analyst James Faucette said. “Many of the new payment players tend to partner with Visa and operate on its rails, given Visa’s competitive cost structure and moat.” With this in mind, the analyst sets a $165 price target for the stock (7% upside potential). The firm is also modelling for significant EPS Growth CAGR (’16-’21e) of +20%. See what other Top Analysts are saying about V.
7. NextEra Energy (NEE– Research Report)
- Street consensus: Strong Buy
- Average analyst price target: $197 (2% upside potential)
NextEra Energy is a leading clean energy producer. “We generate more wind and solar energy than any other company in the world” says NEE, which plans to invest $40 billion in the US through 2020.
According to Morgan Stanley this is the most promising utilities stock for long-term gains. “Best-in-class utility coupled with a premier renewable energy business,” said analyst Stephen Byrd. “We believe NextEra has the largest set of growth opportunities, a strong balance sheet, and the best competitive position among the US utilities we cover.” Byrd has a $191 price target on the stock. See what other Top Analysts are saying about NEE.
Enjoy the Research Report on the Stocks in this Article:
Alphabet Inc (GOOGL) Research Report
Anthem Inc (ANTM) Research Report
McDonald’s Corp (MCD) Research Report
Estee Lauder Companies Inc (EL) Research Report
NextEra Energy Inc (NEE) Research Report
Progressive Corp (PGR) Research Report
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