3 Investment Ideas For The Long Run
Chris Lau, Kapitall: Morgan Stanley chose 20 companies it believed were stocks to hold for the long term. Morgan Stanley looked at the following characteristics to base its selection:
· Competitive advantages
· Business model
· Pricing power
· Cost efficiency
Choosing companies based on fundamental analysis should be sound, but investors should not ignore other metrics that would not show up on fundamental analysis. This includes sentiment and technical patterns of a stock.
The 20 companies that came up were:
On average, the 20 companies are up 12.7% from their 200 day moving average, and up 4.3% from their 50 day moving average. From a pricing standpoint, the companies do not appear to give value for investors buying at this time. 3 companies that stand out are discussed below.
1. Gilead Sciences Inc. (GILD): Gilead has a stronghold in treating HIV. In a Phase 2 study for Tenofovir Alafenamide, the company reported improvements in renal and bone safety.
In February, Gilead met its goals for a Phase III study for once-daily Sofosbuvir. This drug is used to treat hepatitis C. Regulatory approval is set for Q2.
2. Symantec Corporation (SYMC): Anti-virus maker Symantec continues to stay relevant even though the PC market is declining and the mobile market is growing. Shares are at a 52-week high, closing at $24.55 recently.
Symantec hired a new CEO in July 2013. The new leader reduced its product offering and focused on integrated its software solutions.
3. Amazon.com Inc. (AMZN): Despite trading at lofty P/E levels, Amazon is viewed by the Morgan Stanley as a company to own. Amazon.com shares were defying logic for much of 2013, but have pulled back 8% from a 52-week high. JP Morgan downgraded Amazon, predicting gross profits would drop this year. JP Morgan also reduced its earnings estimates to $2.83 from $3.01 per share.
Amazon has the capacity to grow subscribers at a loss. Amazon Prime memberships grew after the firm included a free trial with the Kindle Fire. Morningstar estimates up to 40% of the trials were upgraded to a paid membership.
(List compiled by Chris Lau, Kapitall Contributor)