Stock Picks: Morgan Stanley’s Top Choices Stock Picks: Morgan Stanley’s Top Choices

Written By Michael Gary Scott

Morgan Stanley (NYSE:MS) is a big name on Wall Street, and many of its analysts are truly at the top of their game. While I wouldn’t blindly follow Morgan Stanley analysts, I do think they’re worth listening to whenever they update their notes or ratings.

For the most part, Morgan Stanley is quite bullish on many of the market’s darlings, especially in the mega-cap scene. Amid the market’s latest upswing, they’ve been proven right to stay bullish, even as some of the bears out there have expressed their doubts that the latest market run can continue.

Adidas: A Fashionable Turnaround

Morgan Stanley recently gave European apparel play Adidas (OTCMKTS:ADDYY) a big vote of confidence with a “double upgrade” to Overweight from Underweight, skipping the Neutral (or Hold) rating. Such double upgrades are quite rare, suggesting a potentially drastic change of the tides.

Most notably, analysts at Morgan Stanley think “lifestyle momentum has legs” as the “fashion pendulum” swings from “chunkier basketball shoes to so-called terrace shoes.” The analysts also pointed to specific pieces of footwear in the Adidas line that could do well from here, specifically Samba, Gazelle, and Spezial.

As fashion trends shift in time for summer 2024, perhaps Adidas classics will be in higher demand compared to Jordans, high-tech runners, and those “dad shoes” with large midsoles.

I think Morgan Stanley is right to praise Adidas as it continues its comeback from its late-2022 depths. Since hitting that bottom, the stock has soared more than 140%, an impressive showing that tells us it’s ready to thrive in the post-Yeezy era.

Seagate Technology: Riding the Data Wave

Data storage firm Seagate Technology (NASDAQ:STX) won a nice upgrade from Morgan Stanley analysts. Led by big-name analyst Erik Woodring, the bank hiked STX stock to Overweight from Equal-Weight alongside a price target raised to $115.00 per share.

Analysts see an opportunity to expand margins through numerous means. From “better pricing” to “build-to-order dynamics,” Seagate certainly has many levers it can pull to enhance profitability. Additionally, Morgan Stanley sees Seagate as a beneficiary of the generative AI boom.

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Undoubtedly, the AI rush will likely see increased uptake for data storage hardware in addition to GPUs. In that regard, STX stock may very well be a stealthy way to play the AI uprising.

More recently, Seagate disappointed some when it noted delays in meeting orders for its innovative heat-assisted magnetic recording (HAMR) drives. The HAMR technology allows for greater areal density and seems to represent one of the latest breakthroughs in data storage solutions. In my view, a small delay won’t change demand for such a game-changing product. If anything, it’s likely to build up.

Netflix: Staying Ahead in the Content Game

Netflix (NASDAQ:NFLX) stock may have stumbled past its latest round of quarterly results. But Morgan Stanley is maintaining its bullish stance and $700 price target, which entails more than 23% upside from Thursday’s close of around $565 per share.

Though NFLX stock has become a heck of a lot more expensive after another year of solid gains, the company has continued to demonstrate its dominance in the mature market of streaming. With one of the best content pipelines in the game that keeps subscribers engaged and subscribed, Netflix still stands above the crowd, even as its rivals look to unlock the full potential behind their IPs.

With hit limited series “Baby Reindeer” keeping viewers talking and the potential to offer refreshing new binge-worthy content we didn’t even know we wanted, I’m convinced NFLX stock has what it takes to blast right past Morgan Stanley’s $700 target this year.

At 40 times trailing price-to-earnings, perhaps the stock is getting too cheap as the firm shifts gears toward profitability and ever-so-slightly away from growth.


The Role of Emerging Managers in Venture Capital

Delving into the World of Emerging Venture Capital Managers

Embarking on a journey through the intricate landscape of venture capital, we encounter a dichotomy that pits the seasoned veterans against the up-and-coming newcomers. A recent analysis by Pitchbook delves into the realm of Emerging Managers and their impact on the world of investments. Established managers, with their wealth of experience and proven track records, often bask in the trust of Limited Partners. In contrast, emerging managers, without such historical accolades, rely heavily on forward-thinking narratives and innovative approaches.

Like a gust of fresh air in a room long occupied, emerging managers in sectors such as venture capital have displayed a consistent outperformance trend since the late 1990s. However, this path to success is not without its bumps and hurdles, as volatility in returns tends to be higher for emerging managers compared to their established counterparts.

The Trends and Insights Unveiled

Within the realm of venture capital, the period between 2010 and 2019 saw simulations indicating that portfolios managed exclusively by emerging talents yielded a median return higher than those helmed by established figures. The shining stars among the emerging managers stood out boldly, showcasing superior performance compared to their seasoned peers, albeit with a wider spectrum of returns and a touch of unpredictability.

Specialization emerges as a critical key to success in the venture capital arena, with specialists consistently outshining generalists across both established and emerging manager categories. The ability to hone in on a specific sector provides an undeniable edge, as founders often gravitate towards sector-focused funds. Such advantages become even more apparent with higher Internal Rates of Return (IRRs) observed among specialist funds in both the top and bottom quartiles.

The Dance of Size and Strategy

For the established guard to maintain their leading positions, periodic evaluations of size and strategy become imperative. Sticking to a familiar market segment and a particular fund size bracket – with funds exceeding $250 million found to offer the most stable returns – holds the key. On the flip side, intentional size restraint among smaller established funds (under $250 million) can lead to significant returns, albeit with a wider performance dispersion.

Even giants like Andreessen Horowitz have ventured into new realms, expanding their horizons and fund sizes while exploring different venture stages. While emerging managers have been hailed for their high returns laced with greater volatility, the safety net of established funds remains a comforting thought for Limited Partners, especially when aiming to minimize downside risks.

Monday Market Highlights

General News:

  • Despite a pullback in LP investments in venture capital, a select cohort of VC firms continues to raise substantial sums. From General Catalyst’s $6 billion VC fund to Andreessen Horowitz’s $7.2 billion across various strategies, the VC world remains rife with activity.
  • Rappi introduces its new global CFO, Tiago Azevedo, as part of their expansion strategy in LatAm.
  • Brazilian fintech Urbano Bank shines with impressive Q1 results, showcasing robust growth in net revenue, accounts, and TPV.
  • Google for Startups launches an AI acceleration program, nurturing AI startups like Advolve, Beep Saúde, and Merama in Brazil.

Deals:

  • Brazilian startup Yuna secures R$ 8 million in a pre-seed round, fueling its AI-driven children’s content creation platform with backing from notable investors.
Financial News Round-Up Insights into the Financial Landscape