US Markets Loading... h m s
Newsletters
Markets
James Faris
- Stocks have already exceeded almost all strategists' expectations in under five months.
- Morgan Stanley is among the firms getting more optimistic, but it still sees limited upside.
- Here are 22 stocks generating plenty of free cash flow that are primed to outperform.
Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview
Thanks for signing up!
Access your favorite topics in a personalized feed while you're on the go.
Advertisem*nt
It's already been a memorable year for US stocks, and it's only Memorial Day weekend.
The S&P 500 headed into the unofficial start of summer at the doorstep of all-time highs, which it set earlier in the week. Leading investment firms tripped over themselves, setting new long-term price targets for the index once it breezed past its previous record in mid-May.
Even some of the most skeptical strategists have become believers in stocks' staying power. Morgan Stanley's Mike Wilson recently revamped his 12-month price target, bumping it to 5,400 from a rather frosty 4,500 before 2024. This year's strong earnings growth inspired the update.
However, Wilson bears little resemblance to bulls, as his new target suggests that the S&P 500 has less than 2% upside in the next year.
Advertisem*nt
That's not to say the veteran strategist doesn't see opportunities in markets. Wilson and his team are excited about several investments: quality stocks — both cyclicals and growth names — as well as large caps and firms in the consumer staples, utilities, and industrials sectors.
The common threads between those top ideas are consistency and financial health.
Quality stocks fit that description by definition thanks to their robust balance sheets that keep them afloat in any economy, and the same is often true of large caps. Consumer staples and utilities are defensive and don't tank when economic growth does, while industrials have key long-term tailwinds that should help them hold up better than usual if there's weakness ahead.
22 cash-creating stocks to buy now
Those aforementioned attributes also apply to stocks that produce high levels of free cash flow — a point that hasn't gone unnoticed by Morgan Stanley.
Advertisem*nt
Wilson and company shared several screens of overweight-rated companies in a late-May note, including a basket titled "high free cash flow yield + high free cash flow growth." Fittingly, the group is made up of US firms that are in the top 40% of those two categories. Only the 1,000 largest stocks in domestic markets were considered.
Below are those cash-generating companies along with their ticker, market capitalization, sector, industry, and other Morgan Stanley stock lists that the company is on, if applicable.
Advertisem*nt
1. Devon Energy
Ticker: DVN
Market cap: $30.4B
Sector: Energy
Industry: Oil, Gas & Consumable Fuels
Other list(s): High-quality cyclicals
Source: Morgan Stanley
Advertisem*nt
2. Enlink Midstream
Ticker: ENLC
Market cap: $5.8B
Sector: Energy
Industry: Oil, Gas & Consumable Fuels
Other list(s): High-quality cyclicals, operational efficiency, high alpha
Source: Morgan Stanley
Advertisem*nt
3. Equitrans Midstream
Ticker: ETRN
Market cap: $6.1B
Sector: Energy
Industry: Oil, Gas & Consumable Fuels
Other list(s): High-quality cyclicals
Source: Morgan Stanley
Advertisem*nt
4. Marathon Petroleum
Ticker: MPC
Market cap: $62.6B
Sector: Energy
Industry: Oil, Gas & Consumable Fuels
Other list(s): High-quality cyclicals, operational efficiency, high earnings revisions breadth + high earnings revisions, high alpha
Source: Morgan Stanley
Advertisem*nt
5. Cummins
Ticker: CMI
Market cap: $39B
Sector: Industrials
Industry: Machinery
Other list(s): High-quality cyclicals, operational efficiency, high earnings revisions breadth + high earnings revisions
Source: Morgan Stanley
Advertisem*nt
6. PACCAR
Ticker: PCAR
Market cap: $57.4B
Sector: Industrials
Industry: Machinery
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
7. WABTEC
Ticker: WAB
Market cap: $29.9B
Sector: Industrials
Industry: Machinery
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
8. Lear Corp.
Ticker: LEA
Market cap: $7.1B
Sector: Consumer Discretionary
Industry: Automobile Components
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
9. Harley-Davidson
Ticker: HOG
Market cap: $4.7B
Sector: Consumer Discretionary
Industry: Automobiles
Other list(s): High earnings revisions breadth + high earnings revisions
Source: Morgan Stanley
Advertisem*nt
10. Hasbro
Ticker: HAS
Market cap: $8.4B
Sector: Consumer Discretionary
Industry: Leisure Products
Other list(s): Operational efficiency, high earnings revisions breadth + high earnings revisions
Source: Morgan Stanley
Advertisem*nt
11. US Foods
Ticker: USFD
Market cap: $13.1B
Sector: Consumer Staples
Industry: Consumer Staples Distribution & Retail
Other list(s): Consumer Staples overweights
Source: Morgan Stanley
Advertisem*nt
12. Becton Dickinson
Ticker: BDX
Market cap: $66.1B
Sector: Healthcare
Industry: Healthcare Equipment & Supplies
Other list(s): Operational efficiency
Source: Morgan Stanley
Advertisem*nt
13. Medtronic
Ticker: MDT
Market cap: $109.3B
Sector: Healthcare
Industry: Healthcare Equipment & Supplies
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
14. Teleflex
Ticker: TFX
Market cap: $9.7B
Sector: Healthcare
Industry: Healthcare Equipment & Supplies
Other list(s): Operational efficiency
Source: Morgan Stanley
Advertisem*nt
15. Cigna
Ticker: CI
Market cap: $94.5B
Sector: Healthcare
Industry: Healthcare Providers & Services
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
16. Cardinal Health
Ticker: CAH
Market cap: $23.5B
Sector: Healthcare
Industry: Healthcare Providers & Services
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
17. Halozyme Therapeutic
Ticker: HALO
Market cap: $5.6B
Sector: Healthcare
Industry: Biotechnology
Other list(s): High-quality growth, high-quality cyclicals, operational efficiency
Source: Morgan Stanley
Advertisem*nt
18. Royalty Pharma
Ticker: RPRX
Market cap: $15.9B
Sector: Healthcare
Industry: Pharmaceuticals
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
19. Salesforce
Ticker: CRM
Market cap: $264.5B
Sector: Information Technology
Industry: Software
Other list(s): High-quality growth, operational efficiency
Source: Morgan Stanley
Advertisem*nt
20. HP
Ticker: HPQ
Market cap: $32.1B
Sector: Information Technology
Industry: Technology Hardware & Equipment
Other list(s): N/A
Source: Morgan Stanley
Advertisem*nt
21. Dell Technologies
Ticker: DELL
Market cap: $113.8B
Sector: Information Technology
Industry: Technology Hardware & Equipment
Other list(s): Operational efficiency, high alpha
Source: Morgan Stanley
Advertisem*nt
22. Gaming and Leisure Properties
Ticker: GLPI
Market cap: $12.1B
Sector: Real Estate
Industry: Specialized Real Estate Investment Trusts (REITs)
Other list(s): N/A
Source: Morgan Stanley
Read next
More...
Advertisem*nt
