MORGAN STANLEY: Buy these 22 stocks that are slashing costs as sales take a hit from COVID-19, putting them in position to smash the market as the economic recovery continues
Morgan Stanley Chief US Equity Strategist Mike Wilson has consistently taken a relatively bullish stance on how the US economy, and in turn equity markets, will perform over the next couple of years as the country tries to shirk its COVID-19 outbreak.
In his most recent note, he stayed with this positive outlook, saying he expects strong 2021 earnings. He flagged two key catalysts that he said should make this view a reality: government stimulus that supports consumer demand and cost-cutting measures that help businesses.
“We think that a return of topline growth and a material reduction in the cost base will lead to operating leverage flow through that such that peak profits will appear again before peak sales,” Wilson said. “We’ve seen margin upside drive earnings growth coming out of prior recessions and expect the same this time, with potential further upside from massive fiscal stimulus.”
To that end, Wilson and his team conducted an analysis of second-quarter earnings statements by looking for firms that could benefit from strong earnings in 2021 as a result of better operating leverage.
They screened for companies that met the following criteria:
- Year-over-year sales decline of greater than 5%.
- Year-over-year …continued .