Morgan Stanley: 30 for 2013
Via Morgan Stanley:
The consensus is increasingly of the view that ‘Buy and hold is dead’… Bruised and battered by the steep decline in the S&P 500 so far this decade, many investors have concluded that only the most adroit traders are positioned to attain profits, particularly in light of the past year’s often extreme volatility. …but we say ‘Long live buy and hold!’ We strongly believe that the dislocations in the market since last fall provide attractive opportunities to identify companies with a sustainable competitive advantage that are likely to emerge from the ongoing recession with an even more powerful edge over their competitors.
30 for 2013
Adobe Systems
Alexion Pharmaceuticals
Amazon.com
Apple
Applied Materials
AT&T
Bank of America
Bank of New York Mellon
Baxter International
BlackRock
Cisco Systems
Coach
ConocoPhillips
Covidien
Danaher
Hudson City Bancorp
Lockheed Martin
Monsanto
Philip Morris International
Prudential Financial
Schlumberger
Sherwin-Williams
Ultra Petroleum
Union Pacific
URS Corp.
VMware
Wal-Mart
Weatherford International
Wells Fargo
Yum! Brands
June 3rd, 2009 at 3:08 pm
And as soon as the stock goes up sell to lock in profits.
June 3rd, 2009 at 3:19 pm
MS thinks BAC and WFC are buy and holds? Do they mind telling us why they think that. Do they think the Gov’t will pay top dollar for the debit of those toxic twins?
June 3rd, 2009 at 3:25 pm
… but only if you buy NOW! But wait, There’s more! We’ll throw in two more years. Yes! These will be good to hold until 2015!! Call NOW!
June 3rd, 2009 at 3:29 pm
Why give what Morgan Stanley thinks ‘air time’. Because we are in a secular bear market those ‘picks’ will not yield much by 2013 IMHO.
June 3rd, 2009 at 4:02 pm
Watch those REITs – relative strength there (why?).
Are we seeing the beginning of a dollar retracement, or is this just noise?
Incidentally, this has been a pretty fugly day for me. The only thing showing green for me is MCD in my retirement account.
June 3rd, 2009 at 4:21 pm
You had better be very selective…the current forward P/E for the S&P for 6/30/09 is, and you can look it up, over 3500.
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS?GXHC_gx_session_id_=5350992f205e73e4&
June 3rd, 2009 at 4:28 pm
Buy and Hold is just too risky.
Today, the intelligent investor who believes in B&H also owns collars to protect his/her assets. Sure profits are limited, but collars guarantee no large losses – and that’s the key to long-term success.
http://blog.mdwoptions.com/
June 3rd, 2009 at 4:32 pm
I agree with Rebeltraders – why is this BS even on your blog?
June 3rd, 2009 at 4:32 pm
There are no more ‘rules’ or traditional investment strategies that are going to work in the long run.
The randomness is now so pervasive that the only thing that seems to be sure is that the old adage: “the market will fluctuate” now and will do so far into the future.
There appear to be forces at work that ’speed up’ the fortunes or misfortunes for all companies publicly held.
Without knowing what the insiders do, all you can hope to do is be on the right side of their trades along with them .
It will be an interesting exercise to compare this list to its standing in 10-20 years.
I have a list like that and on it is Microsoft, Worthington industries, Polaroid, Florsheim, Digital Equipment Corporation, National Cash Register, and bunch of other dogs.
To obtain a solid retirement nest egg, it looks as if the average investor is going to have to become a vary savvy gambler with nerves of steel and a nimble mind, or lose his shirt.
The stock market has been a place for ‘play money’ for years. Even the real estate market made it into the ranks of casinos as well.
Bonds, stocks, R.E., commodities, you name it and the only ones who will profit will be those who artifiicially ‘create’ the shortages and stimulate the demand for their products, pretty much like the guys who market p0liticians, the Sham-Wows, etc. The Ron Popeils of the world Unite!
June 3rd, 2009 at 4:32 pm
Mark W., any good books you have found on how to use collars on entire portfolio’s?
Steve B., looks like the 12/31/08 earnings are just fugging up the current PE. I think the PE you are referring to is not a forward PE as so much as a trailing PE (using this current quarters estimates + last 3 quarters). Still haning on to QID?
June 3rd, 2009 at 4:38 pm
Any reason for the late run-up this afternoon?
June 3rd, 2009 at 4:43 pm
@jd:
I would call the last 12 months the trailing P/E. The best usage of P/E is a trailing, as reported number, since that is what we have so much data on and it does not ignore things like options expenses and does not hinge on analysts estimates. On that basis, the P/E is 132. If we ignore that really bad 4Q08, we have to move all the way ahead to the estimates through 12/31/09…and still get a P/E of 33 (a dangerous bubble type P/E)…the long term avg, as reported P/E on a forward basis must be less than the LT avg on a trailing basis, which is around 14. Let’s say it is 12…you are almost 3 times the LT average, let alone what the P/E should be at a major bottom.
Yes, still hold QID…apparently I should have sold awhile back (holy understatement)…but I believe my thesis for holding is stronger than when I bought my first share. If I’m wrong, I’m pretty stupid, or the market is even more rigged than I thought.
June 3rd, 2009 at 4:48 pm
Calvin–reason for the run-up? I was buying like crazy just before the close. Sorry, I didn’t think it would have this effect.
June 3rd, 2009 at 4:55 pm
If you take this post and add it to comments from a previous one where somebody was talking about Wells Fargo offering home equity loans online (to buy more real estate!), it shows how desperately the banksters want to get back to the mid 2000’s when times were good for them. Maybe I’ll have to give SKF another look this week.
June 3rd, 2009 at 4:55 pm
So, what is the track record of Morgan Stanley’s stock recommendations?
June 3rd, 2009 at 5:07 pm
Based on technical analysis, I agree with MS here. S&P cracks 1500 in late 2013, then creams us all in 2017 where the real bottom is.
And for my next trick, I will saw the Deficit in half.
…but only to re-tranche it.
June 3rd, 2009 at 5:16 pm
Is “buy and hold” dead?
I will boldy predict that 10 years from now, the S&P will be higher in nominal terms.
(Better to “buy and hold” a basket of gold, commodities, and emerging market stocks).
June 3rd, 2009 at 5:22 pm
VTI (Vanguard Total Market Index ETF) will outperform these 30 in a market-cap weighted basket over that time frame.
June 3rd, 2009 at 5:27 pm
@DL: I agree with you there. My only longer term (whatever that means) holdings are commodities and selected emerging markets. That’s it for me for right now.
June 3rd, 2009 at 5:36 pm
@ Steve Barry / JD
Steve – your term usage is unclear. In the original post you said “forward PE”, this would be based on forward earnings and NOT trailing. Those are your two choices.
There is a further BIG mistake here, which is that massive consistent negative losses at 1 company or a dozen banks do NOT create negative index earnings. Say half the companies were having massive losses and going bankrupt… the index would still be worth 10-15x PE on the other half of the companies going forward.
So we have to consider the value of negative EPS carefully in making judgement about index PE. With the basic idea that any index component has a minimum value of “0″, right?
Also, I will throw in there that PEs are only valuable in relation to interest rates. So to compare with 1980 market lows when rates were 15% is silly. A 7x PE in 1981/2 might be the same as a 15x PE in 2009.
June 3rd, 2009 at 5:41 pm
Mannwich @ 5:27
Which commodities? As A.T. points out, some of the ETF’s are “money vampires”. Among the commodity ETF’s, USO looks particularly bad (relative to $WTIC). DJP, however, is not that bad relative to $CRB
June 3rd, 2009 at 5:41 pm
[...] Barry Ritholz has this from Morgan Stanley: The consensus is increasingly of the view that ‘Buy and hold is dead’… Bruised and battered by the steep decline in the S&P 500 so far this decade, many investors have concluded that only the most adroit traders are positioned to attain profits, particularly in light of the past year’s often extreme volatility. …but we say ‘Long live buy and hold!’ We strongly believe that the dislocations in the market since last fall provide attractive opportunities to identify companies with a sustainable competitive advantage that are likely to emerge from the ongoing recession with an even more powerful edge over their competitors. [...]
June 3rd, 2009 at 5:44 pm
Calvin Jones and the 13th Apostle Says:
June 3rd, 2009 at 4:38 pm
Any reason for the late run-up this afternoon?
reply:
————-
No, Business as usual. Just the daily pump. We only had one today. They only do it ’cause it works.
June 3rd, 2009 at 5:47 pm
——–SELL———
Maybe, need a couple more days. For the first time in quite a while, I’m seeing weakness.
http://www.bushongbusiness.com/opinion.html
June 3rd, 2009 at 6:04 pm
Dead Hobo Says (from another thread)-
“I’m guessing Uncle Stupid has made it illegal for TARP recipients to short the market and virtuous to stop shorts from bringing it down. The stock market is currently an abomination.”
I’ve been thinking this a while- and have voiced the same argument- possibly a verbal directive from the USG to the TARP recipients- the market seems surreal- almost impossible to trade- I am net negative so far this year- and outside of QID- am all cash-
mind bending experience- thanks to- IMO- collusion
June 3rd, 2009 at 6:09 pm
and I like lftbk’s $ idea- my superior IQ tells me the $ is toast- but maybe there is a short term window where it can rally- but maybe-
it will just be a colossal beat down of unprecedented proportions- never to recover-
comments please
June 3rd, 2009 at 6:18 pm
I’ll cop to energy and even the ag but tech and financials? That’s a turkey shoot. At best!
Is this the legendary “chimpanzee throwing darts” stock pickin’ thing again?
Love them yellow weeds. I’ll start my buy-in when the US consumer turns the corner and buys the house on main street with low debt, high(er) savings, and a solid job.
June 3rd, 2009 at 6:19 pm
I would echo the question about why Barry chose to throw this up on his blog without comment. Any help given to these vampires is wrong. But then again maybe he just knew his readership and was trying to stir the pot!
June 3rd, 2009 at 6:47 pm
stocks are a fad that come in and out of fashion. unfortunately the last 25-30 years have an ingrained psych that stocks always go up. this mentality takes time to change but it will eventually will. i expect complete revulsion of stocks in the immediate term. the short term obviously has dopes still all lathered up for some reason.
June 3rd, 2009 at 6:49 pm
@cognos:
The P/E for 6/30/09 is a little bit of a hybrid…3/4 of it is trailing…one qtr, which is now 2/3 over, is forward. The traditional usage of “forward P/E ” are the next 12 months based purely on analyst estimates. There is ambiguity, but when I said “forward P/E for 6/30/09″, that should clear up the ambiguity by giving a date.
As for negative earnings effects, I really don’t see why I should eliminate them…as for the effect of interest rates, Hussman tries to debunk the “Fed Model” as a “statistical artifact”.
http://www.hussmanfunds.com/wmc/wmc070820.htm
June 3rd, 2009 at 6:52 pm
Hussman’s conclusion on the Fed Model:
“On close inspection, the Fed Model has nearly insane implications. For example, the model implies that stocks were not even 20% undervalued at the generational 1982 lows, when the P/E on the S&P 500 was less than 7. Stocks followed with 20% annual returns, not just for one year, not just for 10 years, but for 18 years. Interestingly, the Fed Model also identifies the market as about 20% undervalued in 1972, just before the S&P 500 fell by half. And though it’s not depicted in the above chart, if you go back even further in history, you’ll find that the Fed Model implies that stocks were about as “undervalued” as it says stocks are today – right before the 1929 crash.”
June 3rd, 2009 at 6:55 pm
I hear Morgan Stanley is now going to get its own hour on CNBC as they have been identified as prime cheerleading material. What about full disclosure? What kind of business activities do they have with these companies and/or how many shares of each do they own?
June 3rd, 2009 at 7:58 pm
I don’t know if I’d say this about buying any of these stocks now, but yeah back in March, some of the names on here probably have a pretty good chance of being higher by 2013, assuming the spx doesn’t drop in nominal terms as it has in Gold. I don’t know all of the stocks really well but my thinking is many, if not all of them will earn more money outside the US than in it in the coming years. So…Perhaps the best buy and hold, if you are going use that strategy, are some solid emerging mkts etf’s without leverage.
June 3rd, 2009 at 8:22 pm
@Jdamon33:
No specific book on that subject.
My Rookie’s Guide to Options explains collars (+ 5 other strategies) in detail. But I did not include how to
insure entire portfolio.
But: if you are diversified, find an index that correlates well (SPX perhaps). With index near 930, buying one put and selling one call comes close to collaring a portfolio worth about $93,000. Obviously there’s correlation risk and the naked call is going to require steep margin. Choose strike prices that suit how much protection you need (buy the 85 to 90 put?) and sell a call – depending on how much cash you want to collect and how upside youa re willing to accept as a limit (96 to 100 call?)/
Very flexible strategy.
blog (at) mdwoptions (dot) com
June 3rd, 2009 at 11:10 pm
I don’t see GE ?!
Dow 3600 !!!!
June 4th, 2009 at 2:59 am
Great blog and you’re 10 times smarter than me, BR, but here is why I think Cisco might not be the best investment over the next few years. 1) HP and 2) Huawei.
On the margin, they have been losing small amounts of market share to the “ankle biters” (F5, RVBD, FDRY/BRCD, ARUN etc. ) as Cisco’s technology is no longer first rate, and their customers know it, but this has been obscured by their brand, distribution, acquisitions and marketing prowess to grow which has created a “no one gets fired for buying Cisco” mentality among buyers. However, I believe there is a sizable (30%??) amount of customers that if given the option would abandoned Cisco for a alternate world class networking player, and it appears that HP is on the cusp of becoming one, as Cisco’s move into the data center server market has caused HP/EDS (and to a lesser but not insignificant extant IBM/IGS) to declare war on Cisco. Also, Huawei is growing by leaps and bounds and while in the past has for the most part not taken on Cisco head-on, most likely will be unavoidable over the next few years. So while Chambers believes Cisco can grow in the mid teens in a “normal economy” I think they will be lucky to grow at half that rate over the next five years. As the Chinese say, we live in interesting times.
June 4th, 2009 at 1:33 pm
Re a number of comments inquiring about detail of the 30 for 13, the full report is a typical sell-side publication. It emphacizes companies as a) a strong regional play, b) best of breed within the industry or c) whose whose risk v reward exceeds may exceed the market based on fundamental analyses.
The report was released in January. If you actioned on these stocks, you would have done very well already.
June 4th, 2009 at 1:40 pm
I’m holding small amounts of MCD and UNP.
The rest of that list looks like someone got a WTF memo right after a long lunch.
“Give Me A List NOW”
None of it matters!!
I’m RICH!!
Got this in my email today!!
I’m going to get all that money back!!
Dear Friend ,
I am Mrs.Ruth Madoff, wife of bernard madoff.
I am actually going through some kind of difficult time with my family right
now, as my husband is at the Metropolitan Correctional Center, New York City.
My husband’s Sentencing is scheduled for June 16, 2009 and he is likely to
face a maximum sentence of 150 years in prison and $170 billion in
restitution, so there is need for me to move out alot of my personal funds
and personal belongings around the world , particularly from outside
america, but i need somebody to trust now, because i cannot receive funds
here in america right now.
I would need your help in acquiring some money and keeping some large cash
amount for me. but first i would prefer to hear from you relating to the
above proposal.
This is very urgent, i would have to entrust a large amount of money into
your hands and some personal valueables. But this would have to be very
confidential, just between me and you, because the press are after me and
my husband name all over the headlines, because of his Wall street business.
Anyway,don’t be scared about the risk, it is a very safe deal and we should
work to protect our interest.
Yours Sincerely
Mrs. Ruth Alpern Madoff
Email:a.madoffruth.1944@live.com
June 4th, 2009 at 2:38 pm
No Google?