MORGAN STANLEY: Here Are 40 Stocks That Should Grow No Matter What

Morgan Stanley is out with a new report on “secular growth” stocks. That is, 40 stocks that are expected to grow independent of the fluctuations of the business cycle.

Tech stocks make up 40% of the list, playing into “Cloud, Social, Mobile, and Big Data themes.” The next most common stock is retail at 18% featuring restaurants, online retailers, and performance apparel.

“Morgan Stanley analysts believe that the names selected for this report can grow strongly even if the global economy grows more slowly than our current, below-trend GDP forecasts,” according to the report.

Note: The EPS growth is the projected compound annual growth rate (CAGR) from 2012-2015, the PE estimates are based on 2013 Morgan Stanley research expectations, and the PEG ratio refers to the price-earnings to growth ratio which is an indicator of the stock’s valuation. Growth stocks with lower PEGs are generally considered cheaper.

21st Century Fox

Ticker: FOXA

EPS growth: 13.4%

PE 2013: 21.6

PEG ratio: 1.6

90% of growth will come from 'well-positioned TV assets' in Morgan Stanley's view, according to Benjamin Swinburne.

Source: Morgan Stanley

Ticker: AMZN

EPS growth: NM

PE 2013: 662.7

PEG ratio: NA

'We expect Amazon to benefit from the continued shift of consumer spending to online/mobile from traditional brick-and-mortar retail,' writes Morgan Stanley's Scott Devitt.

Source: Morgan Stanley


Ticker: ATHN

EPS growth: 26.4%

PE 2013: 113.7

PEG ratio: 4.3

'Continued mid-term stimulus spending on Healthcare IT over the next few years position ATHN to benefit from Healthcare IT secular growth story,' according to Morgan Stanley's Ricky Goldwasser.

Source: Morgan Stanley

Atlas Energy

Ticker: ATLS

EPS growth: NM

PE 2013: 26.6

PEG ratio: NA

Atlas has 'substantial runway to accelerate growth at both entities through organic project development, third-party acquisitions, and retail drilling partnership capital raises,' according to Morgan Stanley's Stephen Maresca.

Source: Morgan Stanley


Ticker: BWA

EPS growth: 16.1%

PE 2013: 18.2

PEG ratio: 1.1

'We believe BorgWarner is the strongest pure play on improving fuel efficiency trends,' writes Morgan Stanley's Ravi Shanker.

Source: Morgan Stanley

Boyd Gaming Corporation

Ticker: BYD

EPS growth: NM

PE 2013: 395.8

PEG ratio: NA

'Boyd is best positioned to benefit from the upcoming gradual legalization of online gambling in the US,' according to Morgan Stanley's Thomas Allen.

Source: Morgan Stanley

Chart Industries

Ticker: GTLS

EPS growth: 31.4%

PE 2013: 37.1

PEG ratio: 1.2

Morgan Stanley likes this one thanks in part to the 'adoption of LNG (liquefied natural gas) as a fuel in the US for transportation,' writes Ole Slorer.

Source: Morgan Stanley


Ticker: CMG

EPS growth: 21.1%

PE 2013: 38.8

PEG ratio: 1.8

'We believe Chipotle is taking share from traditional fast food and casual dining restaurants based on better quality offerings at a modest price,' writes Morgan Stanley's John Glass.

Source: Morgan Stanley

Dunkin Brands Group

Ticker: DNKN

EPS growth: 17.3%

PE 2013: 28.9

PEG ratio: 1.7

'Dunkin's all-franchised business model achieves the highest margins and returns in the industry,' writes Morgan Stanley's John Glass.

Source: Morgan Stanley


Ticker: FB

EPS growth: 40.0%

PE 2013: 67.0

PEG ratio: 1.7

Morgan Stanley's Scott Devitt believes that Facebook's attempt to compete for TV ad budgets will mean 'substantial upside potential to video revenue.'

Source: Morgan Stanley

Fleetcor Technologies

Ticker: FLT

EPS growth: 22.2%

PE 2013: 28.2

PEG ratio: 1.3

A 'roll-up story in underpenetrated fleet card business,' according to Morgan Stanley's Smittipon Srethapramote.

Source: Morgan Stanley

FMC Technologies

Ticker: FTI

EPS growth: 22.5%

PE 2013: 25.3

PEG ratio: 1.1

FMC will benefit from 'accelerated growth in subsea services' and growth in deepwater oilfield development, according to Morgan Stanley's Ole Slorer.

Source: Morgan Stanley

Genesee & Wyoming

Ticker: GWR

EPS growth: 30.8%

PE 2013: 21.0

PEG ratio: 0.7

Morgan Stanley's William Greene thinks this short-line railroad company 'benefits from broader rail thesis of consistent price and productivity improvements.'

Source: Morgan Stanley


Ticker: GOOG

EPS growth: 13.5%

PE 2013: 18.3

PEG ratio: 1.4

Google has YouTube to thank for its projection. 'We project that YouTube could generate gross revenue of $US20 billion and operating income of $US5 billion,' writes Morgan Stanley's Scott Devitt.

Source: Morgan Stanley


Ticker: LNKD

EPS growth: 74.8%

PE 2013: 141.8

PEG ratio: 1.9

'We believe LinkedIn's substantial opportunities in recruiting, marketing, and sales should enable it to outpace its peers in top-line growth over the next several years,' writes Devitt.

Source: Morgan Stanley

Marsh & McLennan

Ticker: MMC

EPS growth: 15.6%

PE 2013: 17.7

PEG ratio: 1.1

'MMC has leading global growth franchises in risk and consulting and is poised to deliver mid-teens (13%+) EPS growth in 2013-15e drive,' according to Morgan Stanley's Gregory Locraft.

Source: Morgan Stanley


Ticker: MA

EPS growth: 18.8%

PE 2013: 26.2

PEG ratio: 1.4

Mastercard, Morgan Stanley's Smittipon Srethapramote says, is the 'key beneficary' of the shift from cash/checks to electronic payment.

Source: Morgan Stanley

Michael Kors Holdings

Ticker: KORS

EPS growth: 26.7%

PE 2013: 27.9

PEG ratio: 1.0

Morgan Stanley's Kimberly Greenberger writes, 'We believe it will likely expand from approximately 280 stores to 650 stores globally.'

Source: Morgan Stanley

Oceaneering International

Ticker: OII

EPS growth: 19.1%

PE 2013: 23.9

PEG ratio: 1.2

Oceaneering International will be a 'beneficiary of secular growth in deepwater oilfield development, increased water depth and reservoir complexity, and increased focus on field maintenance and asset integrity,' according to Morgan Stanley's Ole Slorer.

Source: Morgan Stanley

Palo Alto Networks

Ticker: PANW

EPS growth: 42.4%

PE 2013: 209.9

PEG ratio: 5.0

'We find PANW well-positioned to sustain a 30%+ cash flow CAGR through C2015,' writes Morgan Stanley's Keith Weiss.

Source: Morgan Stanley


Ticker: P

EPS growth: NM

PE 2013: 808.7

PEG ratio: NA

'We think Pandora's best-in-class streaming music service should help it disproportionately benefit from the shift in listening from broadcast to digital channels,' writes Morgan Stanley's Scott Devitt.

Source: Morgan Stanley

Ticker: PCLN

EPS growth: 26.1%

PE 2013: 24.7

PEG ratio: 0.9

Devitt writes that 'offline-to-online shift in global hotel bookings still has a long runway for growth.'

Source: Morgan Stanley

Roadrunner Transportation

Ticker: RRTS

EPS growth: 23.5%

PE 2013: 19.1

PEG ratio: 0.8

With a potential for increased M&A activity and 'margin expansion potential,' Morgan Stanley's William Greene writes that Roadrunner has organic revenue growth opportunities.

Source: Morgan Stanley

Ticker: CRM

EPS growth: 22.8%

PE 2013: 153.2

PEG ratio: 6.7

'Salesforce offers leading solutions across Sales, Service, Marketing and Platform as a Service (PaaS), with each capable of scaling to $US1 billion-plus,' according to Morgan Stanley's Keith Weiss.

Source: Morgan Stanley


Ticker: NOW

EPS growth: NM

PE 2013: NM (2014 estimate: 409.3)

PEG ratio: NA

'We see NOW as one of the best growth stories in software, with room for upside as new sales hires become productive,' according to Morgan Stanley's Jennifer Lowe.

Source: Morgan Stanley


Ticker: SPLK

EPS growth: NM

PE 2013: NM (2014 estimate: 338.6)

PEG ratio: NA

'The log data platform story should continue to develop apace, with Splunk seeing larger deals as it scales in the enterprise while the apps strategy drives use-case expansion and further user adoption,' writes Morgan Stanley's Keith Weiss.

Source: Morgan Stanley


Ticker: SBUX

EPS growth: 20.8%

PE 2013: 34.8

PEG ratio: 1.7

The 'category leader' in high-margin coffee, Starbucks will likely see revenue growth 'driven by expansion of food and packaged good sales, acceleration of domestic store growth, (and) continued rapid international growth,' writes Morgan Stanley's John Glass.

Source: Morgan Stanley

Tableau Software

Ticker: DATA

EPS growth: 8.1%

PE 2013: NM

PEG ratio: NA

'Expanding the use of a powerful analytics and visualisation solution outside of the traditional business intelligence user base opens a very large market opportunity for Tableau,' writes Morgan Stanley's Keith Weiss.

Source: Morgan Stanley

Under Armour

Ticker: UA

EPS growth: 23.3%

PE 2013: 53.5

PEG ratio: 2.3

Under Armour 'has potential for 20%-plus revenue growth over the next several years due to new product innovation, targeted international growth, increased domestic wholesale distribution, and store expansion,' writes Morgan Stanley's Kimberly Greenberger.

Source: Morgan Stanley

Urban Outfitters

Ticker: URBN

EPS growth: 21.5%

PE 2013: 19.3

PEG ratio: 0.9

For Urban Outfitters, '30% of revenue comes from eCommerce, which could conceivably be 50% in 5 years,' Greenberger estimates.

Source: Morgan Stanley


Ticker: WDAY

EPS growth: NA

PE 2013: NM

PEG ratio: NA

Workday is a cloud-based software vendor, and Morgan Stanley's Jennifer Lowe writes the company is 'well positioned to take meaningful share from legacy vendors.'

Source: Morgan Stanley

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