In this article, we'll look into Morgan Stanley's top 15 stock picks for 2024. If you prefer to skip the introduction about the investment bank and its recent business developments, you can just dive straight into Morgan Stanley's Top 5 Stock Picks for 2024.
With the upcoming U.S. election season looming, the Federal Reserve has attempted to chart a course of interest rate cuts, banking on the assumption that inflation will eventually be reined in. However, despite this, both economic growth and the labor market have displayed resilience. Recent economic indicators have prompted Morgan Stanley Research to revise its forecast for U.S. economic growth, now projecting 2.3% for 2024 and 2.1% for 2025, up from previous estimates of 1.9% and 1.4%, respectively. Consequently, the Fed is expected to initiate the first rate cut of this cycle in July, instead of the previously anticipated June, followed by two more 25 basis point cuts by year-end. Looking ahead to 2025, Morgan Stanley anticipates a continued downward trend in rates, with the Fed making cuts at each meeting through June, aiming to reach a rate of 3.625%.
The first quarter of 2024 marked Morgan Stanley CEO Ted Pick's inaugural term, with his background in investment banking and trading standing in contrast to his predecessor James Gorman's focus on wealth management. Pick's tenure began on a challenging note, with the bank facing headwinds from high-interest rates prompting wealth management clients to shift funds into higher-yielding securities. By April 16, the bank's shares had declined by nearly 7% for the year. However, similar to its competitors like Goldman Sachs Group Inc. (NYSE:GS), Morgan Stanley benefitted from robust trading and investment banking performance in Q1. Pick, emphasizing the vital role of dealmaking as an "existential reality" for companies, signaled a potential catalyst for Wall Street's awaited recovery in investment banking. While Morgan Stanley's resurgence in investment banking trailed some of its competitors—Goldman Sachs saw a 32% increase in fees—Pick remained optimistic.
"I’m feeling good about this being early-to-mid cycle for the classic investment banking, capital markets business around the world," said Pick, who succeeded long-serving chief James Gorman in January.
The results underscored the prowess of Morgan Stanley's wealth management arm, which has been pivotal in driving the bank's growth in recent years, particularly evident in its ability to attract significant new client assets. This led to the bank's first-quarter profits surging by 14% year-over-year to $3.41 billion, or $2.02 per share, with each of its three main divisions contributing to the growth, while revenue increased by 4% to $15.14 billion. Wealth management revenue rose by 4.9% to $6.88 billion, surpassing estimates by $230 million, driven by market gains boosting fee revenue despite a decrease in interest income. At the same time, fixed-income trading revenue dipped by 3.5% to $2.49 billion but still beat expectations by $120 million. Investment banking revenue surged by 16% to $1.45 billion, slightly surpassing the $1.40 billion estimate, driven by higher debt and equity issuance, offsetting lower acquisition fees.
Speaking more on its outlook for the future, this is what the bank's management had to say during the first quarter 2024 earnings call:
Looking ahead to the second quarter, the deposit mix will continue to be the primary driver of NII. Assuming the current forward curve and that our assumptions around client behavior materialize, we would expect NII in the second quarter to again be roughly in line with the first quarter. Our strategy is working. We have a clear path to $10 trillion in client assets across wealth management and investment management. We remain focused on supporting clients on their path to advice, deepening existing client relationships and using our scaled platform to achieve sustainable 30% pretax profits over time. Investment Management reported revenues of $1.4 billion increasing 7% versus the prior year. Results reflect higher asset management revenues, which increased 8% year-over-year, driven by growth in average AUM on higher market levels.
Morgan Stanley's Top 15 Stock Picks for 2024
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Our Methodology
In December 2023, Morgan Stanley released its Equity Sales Global Thoughts, Themes, and Ideas report, featuring a compilation of stocks categorized as "global single name stocks longs" for the year 2024. From this selection, we identified 15 stocks that garnered the highest interest from hedge fund investors. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Some notable names in the list include the likes of The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC) and NextEra Energy Inc. (NYSE:NEE). The readers that went through our article on Morgan Stanley's top stock picks for 2023 will recognize significant changes from last year as the market progresses through interesting fluctuations.
In addition to covering topics like Morgan Stanley's top picks, at Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence technology is on the cusp of earth-shattering breakthroughs, so we identified the cheapest AI stock that is trading at less than 5 times its market value excluding cash and investments with the potential to deliver 100x returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free daily enewsletter on our website. Now, let's take a look at the best stocks to buy for 2024 according to Morgan Stanley.
Lazard Inc. (NYSE:LAZ) is a prominent financial advisory and asset management firm, offering a range of services including investment banking and asset management to institutional clients. With key executive offices located in New York City, Paris, and London, it ranks among the largest independent investment banks globally.
According to Insider Monkey's tracking data for the fourth quarter of 2023, 12 out of the 933 hedge funds monitored had invested in Lazard Inc. (NYSE:LAZ). Among these, the largest stakeholder was John W. Rogers’ Ariel Investments, holding a stake valued at $235.64 million in the company.
Much like The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC) and NextEra Energy Inc. (NYSE:NEE), Lazard Inc. (NYSE:LAZ) ranks as one of Morgan Stanley's top stock picks.
14. Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG)
Number of Hedge Fund Holders: 16
2024 Return so far: ~20%
Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG) provides a diverse array of financial services on a global scale, encompassing banking, leasing, securities, credit card, and consumer finance services. The company operates through four primary segments: Wholesale Business Unit, Retail Business Unit, Global Business Unit, and Global Markets Business Unit.
Insider Monkey's database for the fourth quarter reveals that 16 hedge funds expressed bullish sentiments towards Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG), compared to 14 funds in the previous quarter. Among these, Israel Englander’s Millennium Management holds the leading position in terms of the company's shares.
Sony Group Corporation (NYSE:SONY), a multinational company headquartered in Tokyo, Japan, specializes in designing, developing, producing, and selling electronic equipment, instruments, and devices.
On February 14, Sony Group Corporation (NYSE:SONY) released its financial results for the third quarter of fiscal 2024, ending December 31, 2023. The GAAP EPS stood at ￥294.82, with revenue reaching ￥3747.5 billion, marking a significant 21.7% year-over-year increase.
Insider Monkey's database, tracking 933 elite hedge funds, revealed that the number of hedge funds investing in Sony Group Corporation (NYSE:SONY) remained unchanged in Q4 compared to Q3, with 21 hedge funds. However, the total stake value surged to $952.952 million in the fourth quarter, up from $784.527 million in Q3. Notably, Ken Fisher’s Fisher Asset Management augmented its stake by 6%, now holding 6.36 million company shares valued at nearly $602.150 million as of the fourth quarter.
Varonis Systems Inc. (NASDAQ:VRNS), headquartered in New York City with research and development offices in Herzliya, Israel, specializes in security software solutions. The company's platform enables organizations to effectively manage and safeguard unstructured data. Utilizing User Behavior Analytics, Varonis Systems Inc. (NASDAQ:VRNS) identifies and mitigates abnormal activities indicative of cyber threats.
Varonis Systems Inc. (NASDAQ:VRNS) announced notable growth in its annual recurring revenues (ARR) during its Q4 and full-year 2023 report. ARR surged by 17% year-over-year, reaching $543.0 million. This uptick reflects the company's successful transition to a subscription-based model, a strategic move embraced by the software industry for its predictability and scalability.
According to Insider Monkey's Q4 2023 database, which covers 933 hedge funds, 35 had acquired and maintained shares of Varonis Systems Inc. (NASDAQ:VRNS). Notably, Eric Bannasch's Cadian Capital emerged as the largest hedge fund shareholder, with an investment valued at $142.68 million.
L3Harris Technologies, Inc. (NASDAQ:LHX) stands as a prominent American technology firm, renowned for its expertise in surveillance solutions, microwave weaponry, and electronic warfare. The company was formed as a result of the merger between L3 Technologies (formerly known as L-3 Communications) and Harris Corporation on June 29, 2019. This strategic union positioned L3Harris Technologies to become the sixth-largest defense contractor in the United States, solidifying its presence in the industry.
On April 19, L3Harris Technologies, Inc. (NYSE:LHX) declared a $1.16 per share quarterly dividend, the same as the prior dividend. It will be payable on June 18, to shareholders on record as of June 4.
According to Insider Monkey’s fourth quarter database, 37 hedge funds were long L3Harris Technologies, Inc. (NYSE:LHX), down from 44 funds in the last quarter.
Diamond Hill Mid Cap Strategy made the following comment about L3Harris Technologies, Inc. (NYSE:LHX) in its Q3 2023 investor letter:
“L3Harris Technologies, Inc. (NYSE:LHX) is a defense contractor focused primarily on communications, surveillance and electronic warfare. We anticipate the US’s defense budget will be better than expected over the next few years as the Defense Department focuses on preparing for peer-level threats — an area in which LHX’s capabilities fit nicely. We believe there is room for improvement in recent execution — particularly at recently acquired Aerojet Rocketdyne — and we think LHX’s new management team is well-qualified to improve results. We accordingly capitalized on a recent share-price decline to initiate a position at what we consider a compelling valuation.
Seagate Technology Holdings PLC (NASDAQ:STX) is a renowned American data storage company with origins dating back to 1978 when it was founded as Shugart Technology. Officially launching its operations in 1979, the company has been headquartered in Dublin, Ireland, since 2010, while maintaining operational headquarters in Fremont, California, United States. For the quarter ending March 31, Seagate forecasts revenue to be approximately $1.65 billion, with a margin of error of $150 million, closely aligning with analysts' estimates of $1.64 billion.
Insider Monkey’s scrutiny of 933 hedge fund portfolios for the December quarter of 2023 unveiled that 38 of them harbored stakes in Seagate Technology Holdings PLC (NASDAQ:STX). This is compared to 31 in the preceding quarter.
In addition to The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC) and NextEra Energy Inc. (NYSE:NEE), Seagate Technology Holdings PLC (NASDAQ:STX) is one of Morgan Stanley's top stock picks for 2024.
Discover Financial Services (NYSE:DFS) is a prominent American financial services company that owns and operates Discover Bank, an online banking institution offering a wide range of financial products including checking and savings accounts, personal loans, home equity loans, student loans, and credit cards.
On February 23, investment advisory firm Piper Sandler reaffirmed an Overweight rating on Discover Financial Services (NYSE:DFS) stock and raised the price target to $145 from $127.
Insider Monkey's database indicates that at the end of the fourth quarter of 2023, 43 hedge funds held stakes in Discover Financial Services (NYSE:DFS), with a total value of $1.4 billion. This marked a slight decrease from the preceding quarter, during which 46 hedge funds held stakes worth $1.2 billion.
Devon Energy Corporation (NYSE:DVN) is a major player in the United States' energy sector, focusing on the exploration, development, and extraction of oil, natural gas, and natural gas liquids. Established in 1971 and headquartered in Oklahoma City, Oklahoma, the company has built a strong presence in the industry.
As of April 30, Devon Energy Corporation offers a quarterly dividend of $0.83 per share, reflecting an impressive dividend yield of 6.47%.
Among the 933 hedge funds tracked by Insider Monkey, 50 have invested in Devon Energy Corporation (NYSE:DVN). The largest hedge fund investor in the company is D. E. Shaw, with holdings valued at $230 million.
Biogen Inc. (NASDAQ:BIIB) is a leading American biotechnology company headquartered in Cambridge, Massachusetts, specializing in the research, development, and distribution of therapies for neurological diseases worldwide.
According to Insider Monkey's analysis of 933 hedge fund portfolios for the fourth quarter of last year, 51 hedge funds held shares of Biogen Inc. (NASDAQ:BIIB). Among them, Samuel Isaly’s OrbiMed Advisors had the largest stake, valued at $214 million.
“We started a position in Biogen Inc. (NASDAQ:BIIB) during the quarter, a global biopharmaceutical company focused on multiple sclerosis, spinal muscular atrophy, and most recently Alzheimer’s disease. The company has been on a roller coast since the approval of Aduhelm, for the treatment of Alzheimer’s disease, in June 2021. At the time, the approval was highly criticized given the limited efficacy of the treatment. Following the fallout, the company stands today with a new highly regarded CEO, Christopher Viehbacher, a more efficacious approved Alzheimer’s treatment in Leqembi, a rationalized cost structure and a more disciplined investment approach. While the uptake in Leqembi has been slow, we still see strong long-term potential for a patient population that is dramatically underserved. We believe you are getting the opportunity to buy a high performing health care asset, with a strong track record of delivering superior products all while only paying for the current value of their assets on the market today. At the current valuation, we think you are getting a call option on the pipeline and the Leqembi roll-out. It is not often that you see this sort of risk/reward skew in the market, and we opportunistically took advantage.”
Nu Holdings Ltd. (NYSE:NU) functions as a digital financial services platform and technology company, providing various products such as digital accounts, credit cards, loans, and business solutions.
In December 2023, Insider Monkey analyzed 933 hedge fund portfolios and found that 54 of them had acquired shares of Nu Holdings Ltd. (NYSE:NU). Warren Buffett’s Berkshire Hathaway held the largest stake, valued at $892 million.
“The top 5 positions in the portfolio were: Precious Metals royalty basket, Nu Holdings Ltd. (NYSE:NU), AMD Amazon.com and Converge Technology Services. We often talk about our investment in Nu Holdings but have not presented you with a detailed research report. Our cost base on Nu is about $4 per share while the stock is currently trading for $9 per share. We continue to hold this position and, in the appendix to this letter, we are attaching our thesis on Nu Holdings. We are of the opinion that Nu is a rare company with the powerful combination of substantial market opportunity, an excellent business model, and an outstanding management team.
Nu Holdings Ltd. (NYSE:NU) joins the ranks of The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC) and NextEra Energy Inc. (NYSE:NEE) as one of Morgan Stanley's top stock picks for 2024.
