Morgan Stanley issues its list of the 45 highest conviction stock picks; Here’s our top 3

On April 29, American investment bank and financial services company, Morgan Stanley (NYSE: MS) issued a list of top analyst picks for North America. Analysts are allowed to rate the stocks as ‘overweight’ or ‘underweight’ as their highest conviction. 

The list of 45 stocks contained only the bullish overweight stocks with an average upside of 32% compared to analysts’ starting price targets. Companies are divided into sectors, each containing a couple of leaders in the niche. 

Finbold drilled deeper into the list and has picked out three to keep a closer eye on when building a long-term watchlist.

Southwest Airlines (NYSE: LUV) 

The company is a leader in the airline industry achieving 47 consecutive years of annual profitability through 2019. The focus placed on domestic and leisure travel could be viewed as a competitive advantage over other companies in the field. 

LUV’s balance sheet is very strong with $16.5 billion in liquidity and $3.2 billion of cash on hand along with investment-grade credit rating from all three rating agencies making the company a reasonable choice.     

Shares of the company have been trading choppy in 2022 but are slightly up for the year, recovering from March lows. Volume has been steadily increasing since December of 2021 creating new volume averages, which could indicate more interest in the shares. If shares can break above $48 more upside could be seen. 

On Wall Street analysts give the shares a moderate buy rating, with only one analyst giving a sell rating. For the next 12 months, the analysts predict the average price to be at $53.57, which is 13.62% above the current trading price of $47.15.

Eli Lilly (NYSE: LLY) 

LLY in the pharma space is making moves, recently it signed a collaboration agreement with privately held Genesis Therapeutics to discover new therapies for up to fice targets. Additionally, the latest earnings show off a great financial position. 

Revenue of $7.18 billion means that there was a 14.7% year-over-year (YoY) increase in revenue, the company beat estimates by $520 million. Additionally earnings per share (EPS) of $2.62 beat expectations by $0.32. 

Shares are up 5% year-to-date (YTD) slowly creating an upward channel since February. Currently, the price is only below the 20-day Simple Moving Average (SMA) after a short selloff towards the end of April. The last trading session in April saw buying pressure come in which helped the share price recover a bit before they slightly trended down. 

Meanwhile, analysts give the stock a strong buy rating agreeing that in the next 12 months the average share price will be $314.54. This prediction is 10.08% above the current share price of $285.75, though this may seem pricey the company pays out a 1.37% dividend or $0.98 per quarter. 

Suncore Energy (NYSE: SU)

Elliot Associates a famous large hedge fund recently took a 3.4% stake in the company and will be seeking board seats. They’re known as activist managers and will look to shake up management and business practices for the benefit of both the company and shareholders long term. 

In the last business quarter, the company managed to generate $3.1 billion of funds, or $2.17 per share, an increase of 11% from the previous quarter. Eyes will be on the company when they deliver their new earnings on May 9, investor expectations are possibly high. 

YTD the shares are up 43.7% creating an upward trading channel, above all daily SMAs. The volume increase has been noted in the last trading session in April, causing the stock to pop intraday and it has continued trading in the green for the last few sessions as well. 

On Wall Street, six analysts rate the stock a buy and three a hold giving the shares a moderate buy rating which is not in line with the share’s performance this year. In the next 12 months, the analysts see the shares trading at $38.73, which is ‘only’ 4.8% up from the current price of $36.95.

All of the companies chosen by Morgan Stanely analysts are high conviction plays of companies with solid earnings and good future projected earnings. The three overviewed above should show great earnings potential in the near and long term future. 

Thus, investors would be well advised to keep companies with strong earnings, strong management, and solid potential on their watchlists, as the three above tick all of the boxes.  

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.