Quality cyclicals are expected to continue going up, here are the top-rated by Morgan Stanley
Contributor since / Followers
matdesign24/iStock via Getty Images
Morgan Stanley analysts see further upside in quality cyclicals, as they expect a lighter regulatory environment and a rebound of “animal spirits.”
Financials (XLF), industrials (XLI), and commodity cyclicals showed significant outperformance after the election results, as their backdrop has been improving because of the ease of interest rates.
Financials (XLF) were up 3.5% from Oct. 1 through election day; communication services (XLC) were up 3.3%; industrials (XLI), up 2.2%; and information technology, 0.9%.
However, “we’re respectful of the potential for rate volatility to continue into next year, which is a key reason why we recommend staying up the quality curve within cyclicals and not chasing segments of this cohort that have weaker balance sheets/higher leverage and are likely to be more rate sensitive on this basis,” wrote Michael Wilson, chief U.S. equity strategist and CIO for Morgan Stanley, in a note.
The following are overweight-rated quality cyclical stocks:
- Alphabet (GOOGL)
- Netflix (NFLX)
- Spotify Technology (SPOT)
- Trade Desk (TTD)
- Burlington Stores (BURL)
- Gap Inc. (GAP)
- Ross Stores (ROST)
- TJX Co. (TJX)
- Wayfair (W)
- Doordash (DASH)
- McDonalds (MCD)
- YUM Brands (YUM)
- Target (TGT)
- Baker Hughes (BKR)
- Cheniere Energy (LNG)
- Diamondback Energy (FANG)
- Marathon Petroleum (MPC)
- NOV Inc (NOV)
- Occidental Petroleum (OXY)
- Schlumberger (SLB)
- Bank of America (BAC)
- East West Bancorp (EWBC)
- Huntington Bancshares (HBAN)
- Wells Fargo (WFC)
- Ally Financial (ALLY)
- Blackstone (BX)
- Goldman Sachs (GS)
- Mastercard (MA)
- MetLife (MET)
- DENTSPLY SIRONA (XRAY)
- IDEXX Labs (IDXX)
- Avantor (AVTR)
- Zoetis (ZTS)
- Cummins (CMI)
- Eaton Corp (ETN)
- Rockwell Automation (ROK)
- TransUnion (TRU)
- Nvidia (NVDA)
- Atlassian (TEAM)
- Autodesk (ADSK)
- Hubspot (HUBS)
- Nutanix (NTNX)
- Sentinelone (S)
- Unity Software (U)
- Apple (AAPL)
- Eastman Chemical (EMN)
- Linde (LIN)
- SBA Communications (SBAC)