TOTALINVESTOR: Morgan Stanley: These New 'Nifty 50' Stocks Could Crush The Market For Years To Come

Tuesday, October 18, 2011

Morgan Stanley: These New 'Nifty 50' Stocks Could Crush The Market For Years To Come

In a note out this morning, Morgan Stanley's European Strategy team argues that we're on the verge of seeing a new "Nifty Fifty" — a group of large cap stocks that outperform markets despite a slowdown in Europe.

From 1964 to 1972, a bundle of 50 "Nifty" stocks like Procter & Gamble, IBM, Walt Disney, McDonald's, General Electric, and Polaroid outperformed the S&P by 189%, even though that market moved generally sideways in a difficult macro environment.

With troubling signs from the eurozone and the U.S. and expectations that 80% of global GDP will come from emerging markets in 2012, Morgan Stanley analysts argue that we should be looking for a new lucky bundle once again.

Three components stand out, they say: Stocks with high exposure to emerging markets (specifically, at least 40% of revenues from EM and 17.5% from Brazil, India, and China), stocks with accelerating revenue growth, and reliable stocks with solid earnings and revenue growth.

Morgan Stanley's analysts expect this first, high EM exposure category to see several big winners — even if they've underperformed MSCI Europe overall in 2011.