Morgan Stanley just released its top stock picks for 2015 based on predictions of strong EPS growth and compelling competitive advantages that differentiated them from the pack.
According to Morgan Stanley, "The main criterion is sustainability -- of competitive advantages, business model, pricing power, cost efficiency and growth."
Interested? The bank came up with a list of 50 global stocks. We list below the top 10 stocks by EPS growth (5-year CAGR) that are trading on the U.S. stock exchanges.
Beyond the top 10, companies on the U.S. exchanges and Morgan Stanley's list are: Companhia de Bebidas Das Americas (ABV) 5-year CAGR at 13%, United Technologies (UTX) 13%, Oracle (ORCL) 11%, Target (TGT) 11%, RenaissanceRe Holdings (RNR) 9%, Colgate-Palmolive (CL) 8%.
Do you agree with Morgan Stanley's choices?
(Click here to access free, interactive tools to analyze these ideas.)
1. Amazon.com (Nasdaq: AMZN ) : Operates as an online retailer in North America and internationally. Market cap of $83.0B. EPS growth (5-year CAGR) at 26%. According to Morgan Stanley: "Over the next 5 years, we are looking for 30% annualized sales growth. We have high conviction that Amazon.com can maintain growth at this level by increasing the number of its Amazon Prime accounts."
2. Schlumberger Limited (NYSE: SLB ) : Together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. Market cap of $91.49B. EPS growth (5-year CAGR) at 24%. According to Morgan Stanley: "Thanks to an estimated $1 billion investment per year in R&D, Schlumberger has what we consider the most advanced technology portfolio in the industry."
3. IHS (NYSE: IHS ) : Provides critical information and insight products and services. Market cap of $5.53B. EPS growth (5-year CAGR) at 22%. According to Morgan Stanley: "Almost 80% of the business is subscription-based, providing high revenue visibility. Customers operate their businesses more effectively with the data and analytics that IHS supplies, and the company has vast databases that would likely be cost-prohibitive and extremely difficult for competitors to reconstruct."
4. BorgWarner (NYSE: BWA ) : Engages in the manufacture and sale of engineered automotive systems and components primarily for power train applications worldwide. Market cap of $6.95B. EPS growth (5-year CAGR) at 20%. According to Morgan Stanley: "BorgWarner as the most powerful secular story in the group over the next decade, one that should drive an 18–20% revenue CAGR (approximately four times the industry growth rate) and class-leading margins."
5. V.F. Corporation (NYSE: VFC ) : Designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. Market cap of $14.26B. EPS growth (5-year CAGR) at 19%. According to Morgan Stanley: "VF's changing port-folio mix toward Outdoor and Action Sports should allow it to grow faster, producing mid-teens EPS growth annually. We are bullish on the Timberland acquisition and believe it will be a meaningful contributor to the top and bottom lines."
6. Cognizant Technology Solutions (Nasdaq: CTSH ) : Provides information technology consulting and technology services in North America, Europe, and Asia. Market cap of $20.43B. EPS growth (5-year CAGR) at 18%. According to Morgan Stanley: "We believe that Cognizant intends to transform itself from a best-in-class offshore application development and maintenance (ADM) pure play into a diversified global IT services major over time."
7. Union Pacific (NYSE: UNP ) : Through its subsidiary it provides rail transportation services in North America. Market cap of $48.89B. EPS growth (5-year CAGR) at 17%. According to Morgan Stanley: "We are bullish on the rail industry's advantage over its truck competitors including lower unit costs for high tonnage freight and greater customer captivity."
8. Teradata (NYSE: TDC ) : Provides enterprise data warehousing solutions, including enterprise analytic technologies and services, and integrated marketing software. Market cap of $8.45B. EPS growth (5-year CAGR) at 16%. According to Morgan Stanley: "Since it was spun out of NCR in late 2007, Teradata increased its sales teams by 40% and consultants by 60%. Teradata is just now hitting the sweet spot of growth from these investments."
9. Visa (NYSE: V ) : Operates retail electronic payments network worldwide. Market cap of $82.48B. EPS growth (5-year CAGR) at 15%. According to Morgan Stanley: "Global penetration of electronic payments remains low with 85% of the world's transactions still cash-based, leaving ample runway to support healthy growth prospects through (at least) 2015."
10. QUALCOMM (Nasdaq: QCOM ) : Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap of $90.96B. EPS growth (5-year CAGR) at 14%. According to Morgan Stanley: "Powering roughly 60% of Android devices, which we expect to grow 54.5% in C2012 to 323 million units shipped, we believe Qualcomm continues to gain integrated apps processor share, lifting Qualcomm CDMA Technologies (QCT) operating margins back to the mid-20s over time."
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Author owns shares of AMZN.
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