Stocks

10 Stocks Trading at a ‘Meaningful Discount’ & Poised to Outperform

  • Stay-at-home stocks have been beaten down as the global economy has largely reopened.
  • But some have been punished too severely, according to Morgan Stanley.
  • The bank compiled a list of 10 pandemic beneficiary stocks it thinks have attractive upside.

After pandemic beneficiary stocks enjoyed meteoric appreciation as the global economy shut down, many have since dramatically fallen out of the sky.

As COVID-19 lockdowns and restrictions have eased in much of the world, investors have moved into more cyclical stocks that benefit from resurging economic activity. And as inflation has soared, causing the Federal Reserve to begin tightening policy and interest rates to jump, longer-duration growth stocks with high valuations have suffered. 

The carnage has been brutal. Zoom is down 83% from its high. Peloton is down 90%. Adobe is down 40%. So is Domino’s Pizza. Many more have endured similar fates. 

But according to Morgan Stanley, not all of the names that once benefited from COVID-19 lockdowns and have been subsequently thrashed deserve to be so cast aside. Rather, given the deep sell-off of some names, opportunities for returns among them are once again present. 

In a note to clients last week, a team of Morgan Stanley equity strategists and analysts led by Michelle Weaver compiled a list of 10 COVID beneficiary stocks they believe have upside in the years ahead and are available now at cheap valuations. 

“We continue to gain a clearer picture of what the steady-state ‘Life After Covid’ environment will be. As this is happening, our analysts have observed that some stocks have underperformed in recent months amid market fears these companies only did well amidst the Covid pandemic,” Weaver said in the note.

“Our analysts view these names not as narrowly-defined Covid beneficiaries but instead as solid businesses that are structurally positioned for long-term outperformance,” she added. “We believe this disconnect has left many of them at a meaningful discount to intrinsic value.”

The 10 stocks are listed below, along with analyst commentary about why they present attractive opportunities.

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