Morgan Stanley's 30 for 2025
How does the 2023 selection from Morgan Stanley perform?
In March 2023, after a difficult 2022 year, Morgan Stanley picked 30 stocks based on the sustainability and quality of the business model, and opportunity to widen their competitive advantage.
Here is an article that introduces these 30 stocks and reviews their performance. The investment thesis is based on Morgan Stanley's analysis, detailing why they selected each company.
Alphabet
Investment thesis: interesting portfolio, AI, lot of tailwinds
2024 growth: 12.8%
Net profit margin: 27.1%
PE: 23.4x
FCF yield: 3.84%
Dividend; 0.34%
Current year performance: +27.4%
1y performance: +45.9%
American Express
Investment thesis: sustainable topline growth, positive operating leverage
2024 growth: 9.7%
Net profit margin: 14.0%
PE: 19.3x
FCF yield: -%
Dividend; 1.13%
Current year performance: +29.8%
1y performance: +37.3%
Blackstone
Investment thesis: secular grower at a reasonable price
2024 growth: 23.1%
Net profit margin: 50.9%
PE: 29.6x
FCF yield: 6.08%
Dividend; 2.85%
Current year performance: +6.5%
1y performance: +28.9%
Cheniere Energy
Investment thesis: LNG market leader, strong FCF
2024 growth: -21.3%
Net profit margin: 11.8%
PE: 22.7x
FCF yield: 3.61%
Dividend; 1.02%
Current year performance: +6.6%
1y performance: +15.7%
Costco
Investment thesis: Unique business model, long-term growth driver
2024 growth: 5.2%
Net profit margin: 2.8%
PE: 51.6x
FCF yield: 1.77%
Dividend; 2.27%
Current year performance: +26.9%
1y performance: +51.2%
Eaton
Investment thesis: Huge backlog visibility, energy transition tailwind
2024 growth: 8.2%
Net profit margin: 14.8%
PE: 33.1x
FCF yield: 2.65%
Dividend; 1.20%
Current year performance: +29.2%
1y performance: +48.3%
Eli Lilly
Investment thesis: GLP-1 drug, huge TAM, great tailwinds (obesity, population ageing)
2024 growth: 26.0%
Net profit margin: 27.7%
PE: 63.7x
FCF yield: 1.01%
Dividend; 0.61%
Current year performance: +47.0%
1y performance: +88.9%
Estée Lauder
Investment thesis: Post-Covid beauty rebound, potential margin expansion
2024 growth: 2.2%
Net profit margin: 4.9%
PE: 45.7x
FCF yield: 2.36%
Dividend; 2.73%
Current year performance: -32.4%
1y performance: -48.3%
Exxon Mobil
Investment thesis: Low-carbon opportunities, huge FCF profile
2024 growth: 3.5%
Net profit margin: 10.8%
PE: 13.1x
FCF yield: 7.32%
Dividend; 3.23%
Current year performance: +16.0%
1y performance: +14.1%
Hilton
Investment thesis: Great ROIC, FCF compounder, increasing share of spend on travel
2024 growth: 10.2%
Net profit margin: 14.3%
PE: 34.0x
FCF yield: 2.82%
Dividend; 0.30%
Current year performance: +20.4%
1y performance: +47.2%
Intuitive Surgical
Investment thesis: Ultra innovative, large and growing TAM
2024 growth: 13.3%
Net profit margin: 24.4%
PE: 74.1x
FCF yield: 1.52%
Dividend; -%
Current year performance: +34.9%
1y performance: +30.1%
JP Morgan
Investment thesis: Potential operating leverage, resilient vs peers
2024 growth: 7.9%
Net profit margin: 30.3%
PE: 11.8x
FCF yield: -%
Dividend; 2.27%
Current year performance: +23.3%
1y performance: +36.0%
Liberty Formula One
Investment thesis: F1 increasing popularity, FCF conversion
2024 growth: 20.2%
Net profit margin: 8.0%
PE: 60.8x
FCF yield: 3.25%
Dividend; -%
Current year performance: +24.8%
1y performance: +7.4%
Linde
Investment thesis: Resilient business model, ESG play
2024 growth: 2.5%
Net profit margin: 19.9%
PE: 32.1x
FCF yield: 2.52%
Dividend; 1.24%
Current year performance: +8.3%
1y performance: +18.7%
Lululemon
Investment thesis: Great growth / margin mix, gaining market share
2024 growth: 11.7%
Net profit margin: 16.6%
PE: 19.9x
FCF yield: 4.48%
Dividend; -%
Current year performance: -45.2%
1y performance: -28.2%
Mastercard
Investment thesis: Robust business model, B2B opportunities
2024 growth: 10.8%
Net profit margin: 47.2%
PE: 31.8x
FCF yield: 2.78%
Dividend; 0.59%
Current year performance: +4.0%
1y performance: +11.4%
Microsoft
Investment thesis: Exceptional secular growth exposure with cloud and AI
2024 growth: 15.6%
Net profit margin: 36.0%
PE: 37.2x
FCF yield: 2.13%
Dividend; 0.67%
Current year performance: +16.2%
1y performance: +23.1%
Motorola
Investment thesis: Dominant position, TAM expansion opportunities
2024 growth: 7.1%
Net profit margin: 13.6%
PE: 46.0x
FCF yield: 2.46%
Dividend; 1.00%
Current year performance: +24.6%
1y performance: +33.6%
MSCI
Investment thesis: Competitive advantages, pricing power, attractive industry
2024 growth: 11.8%
Net profit margin: 38.2%
PE: 36.6x
FCF yield: 2.92%
Dividend; 1.29%
Current year performance: -12.3%
1y performance: -2.4%
NextEra Energy
Investment thesis: Competitive position in renewables market, winner of the IRA
2024 growth: -1.0%
Net profit margin: 25.6%
PE: 20.6x
FCF yield: -4.05%
Dividend; 2.87%
Current year performance: +18.5%
1y performance: -0.1%
Nike
Investment thesis: DTC acceleration, improving financial profile
2025 growth: -4.6%
Net profit margin: 9.6%
PE: 23.1x
FCF yield: 4.16%
Dividend; 2.06%
Current year performance: -33.0%
1y performance: -33.8%
Northrop Grumman
Investment thesis: Growing faster than peers, diversified portfolio
2024 growth: 4.7%
Net profit margin: 8.9%
PE: 17.8x
FCF yield: 3.22%
Dividend; 1.81%
Current year performance: -6.4%
1y performance: -1.0%
Old Dominion Freight Line
Investment thesis: Best transportation company, great metrics
2024 growth: 4.2%
Net profit margin: 20.8%
PE: 33.3x
FCF yield: 2.13%
Dividend; 0.54%
Current year performance: -3.5%
1y performance: -1.1%
Prologis
Investment thesis: LT visibility, high barriers to supply, high e-commerce demand
2024 growth: 11.7%
Net profit margin: 34.7%
PE: 42.9x
FCF yield: -%
Dividend; 3.13%
Current year performance: -7.2%
1y performance: +0.8%
RTX
Investment thesis: Strong FCF generation, attractive market
2024 growth: 14.4%
Net profit margin: 7.6%
PE: 24.1x
FCF yield: 3.30%
Dividend; 2.39%
Current year performance: +22.2%
1y performance: +7.6%
Thermo Fisher
Investment thesis: Best-in-class resiliency, M&A optionality
2024 growth: 0.3%
Net profit margin: 14.4%
PE: 33.7x
FCF yield: 3.07%
Dividend; 0.28%
Current year performance: +0.7%
1y performance: -0.2%
T-Mobile US
Investment thesis: 5G leadership, operating leverage, $60B buybacks through 2025
2024 growth: 2.3%
Net profit margin: 13.0%
PE: 20.3x
FCF yield: 5.69%
Dividend; 1.45%
Current year performance: +13,6%
1y performance: +32,3%
Unitedhealth
Investment thesis: Most diversified company in its sector, leader in medicare, Optum opportunity
2024 growth: 7.4%
Net profit margin: 6.2%
PE: 19.5x
FCF yield: 4.52%
Dividend; 1.41%
Current year performance: +7.4%
1y performance: +12.2%
Visa
Investment thesis: Largest customer payment, digital payment tailwind, B2B opportunity
2024 growth: 10.0%
Net profit margin: 54.9%
PE: 27.7x
FCF yield: 3.86%
Dividend; 0.78%
Current year performance: +2.0%
1y performance: +10.0%
Yum! Brands
Investment thesis: Multi-brand company, globally diversified, digital expansion
2024 growth: 8.7%
Net profit margin: 21.0%
PE: 22.6x
FCF yield: 3.56%
Dividend; 2.08%
Current year performance: -2.8%
1y performance: -6.6%
Overall performance
The overall performance is:
Current year performance +8.9%
1y performance +15.9%
As a benmark, here is the performance of some famous indexes:
S&P 500
Current year +16.2%
1y performance: +21.7%
Nasdaq
Current year +16.0%
1y performance +23.4%
MSCI World
Current year +13.0%
1y performance +17.7%
Conclusion
The current concentration of a few winners in the indexes, especially the Magnificent 7, makes them difficult to beat. However, it is uncertain when this concentration process will end.
In the meantime, despite featuring some high-quality names, the selection is underperforming. Even Microsoft isn't outperforming the Nasdaq, although it is hard to be completely dissatisfied with a 20% annual performance!
What do you think of this list? Which stocks would you add or remove?
Blackstone seems to be climbing quickly lately.
No Berkshire?! How dare they!